Blog

It's Official: The Economy Is Set To Starve

Tuesday, November 23, 2010, 1:08 PM
Part I: It's the End of the Oil As We Know It...

If you have already read Part I of this report, please click here to go directly to Part II.

Once a year, the International Energy Agency (IEA) releases its World Energy Outlook (WEO), and it's our tradition here at PeakProsperity.com to review it.  A lot of articles have already been written on the WEO 2010 report, and I don't wish to tread an already well-worn path, but the subject is just too important to leave relegate to a single week of attention. 

Because some people will only read the first two paragraphs, let me get a couple of conclusions out right up front.  You need to pay close attention to Peak Oil, and you need to begin adjusting, because it has already happened.  The first conclusion is mine; the second belongs to the IEA. 

Okay, it's not quite as simple as that; there are a few complexities involved that require us to dig a bit deeper and to be sure our terms and definitions are clear so that we are talking about the same things.

But if we can simply distinguish between two types of "oil" (you'll see why that term is in quotes in a second), the story becomes much easier to follow.

  • "Conventional oil" is the cheap and easy stuff.  A well is drilled, pipe is inserted and oil comes up out of the ground that can be shipped directly to a refinery.  Whether the oil is "sour" or "sweet" doesn't matter; it's still conventional oil.
  • "Unconventional oil" refers to things like tar sands, ultra-deep-water oil, coal-to-liquids, oil shale, and natural gas liquids.  In other words, oil that is much more difficult and expensive to produce.

The IEA has been producing annual reviews of the world energy situation for a long time and has not mentioned the term "Peak Oil" (as far as I know) until this year's report.  And not only did they mention it, they said that as far as conventional oil goes, it's in the rear view mirror:

Crude oil output reaches an undulating plateau of around 68-69 mb/d by 2020, but never regains its all-time peak of 70 mb/d reached in 2006, while production of natural gas liquids (NGL) and unconventional oil grows quickly.

WEO 2010 - Executive Summary

I might quibble that the all-time peak remains 2005 in the US Energy Information Agency data set, but the main point here is that the IEA has not only used the words "Peak Oil" (finally!) but they've done so in the past tense, at least with regard to conventional oil. 

The IEA now sees all forms of oil, conventional and unconventional, hitting a high of 99 million barrels per day (mbd) by 2035 (including 3 mbd of 'refinery gains').  Of course, we may wish to take even this tepid estimate of growth in oil supplies with a grain of salt, because in every annual report, like clockwork, the IEA has been ratcheting down its estimate of how much oil we'll have in the future: 

Assuming that this trend will continue, our prediction is that next year the estimate of future oil supplies will be ratcheted down one more notch.  Perhaps by another 6 mbd, to match the difference between the 2009 and 2010 reports? 

It's when we eyeball the graph that shows us the breakdown in petroleum sources by type that a few important details jump out at us: 

First, pay close attention to the legend for the chart.  Starting at the bottom, note that crude oil from "currently producing fields" (dark blue) is already in sharp decline and is expected to decline from a high of 70 mbd in 2006 to ~15 mbd in 2035; a loss of 55 mbd over 25 years, or 2.2 mbd per year.  The next band up (gray) is crude oil from "fields yet to be developed," which we largely know about but have not yet really started producing significantly. 

My only comment here is that these fields cannot overcome the expected rate of loss in the dark blue band below them.  All of the conventional oil that we know about is now past peak.  In order to keep conventional oil flat, we have to move up to the third band (light blue), which goes by the spine tingling name "fields yet to be found" - which will apparently be delivering a very hefty 22 mbd by 2035.  In other words, the IEA is projecting that in 25 years, more oil will be flowing from "fields yet to be found" than from all the fields ever found and put into production by the year 2010.    

Colin Campbell, one of the earliest analysts of peak oil who has decades of oil field experience, is on record as saying that the "fields yet to be developed" category, originally introduced to the world as unidentified Unconventional in 1998, is a "coded message for shortage" and was, off the record, confirmed as such by the IEA. That coded message is getting easier and clearer to receive by the day.  

But back to the main story line.  Even if the final assessment of future oil production isn't notched down even one more tick, we have all the information we need to spot an enormous problem in the global story of growth.  Assuming that we stick with the 99 mbd by 2035 estimate going forward, this represents a growth rate in oil of only around one-half of one percent (0.5%) per year between now and then.    

This means that over the next 25 years, the global economy will have to make do with less than half the rate of growth in oil that it enjoyed over the prior 25 years.  How will the economy grow with less oil available?  What will happen to the valuations of financial assets that explicitly assume that prior rates of growth stretch endlessly into the future? 

To cut to the chase, the admission by the IEA that we will not be achieving past levels of energy growth should be the most gigantic red flag in history, at least to those who might care that their money or other paper-based forms of wealth be worth something in the future.  What if that future growth does not emerge?  What happens when the collateral for a loan goes sour?  The IEA report indicates an enormous set of risks for an over-leveraged world reliant on constant growth.

The bottom lines are these:

  • The IEA now admits that conventional crude oil peaked in 2006.  Permanently.  Any gains from here are due to contributions from unconventional oil and natural gas-to-liquids.
  • Under no scenario envisioned will future growth in fossil fuel supplies be equal prior rates of growth.
  • Energy from here on out is going to be (much) more expensive.

I cannot state this strongly enough:  The WEO 2010 report is an official admission that Peak Oil is not only real, but it's already here.  


 Part II: Scouring the Globe for Fuel

"Tomorrow’s [economic] expansion was collateral for today’s debt."

~ Colin Campbell

The implications from this report are too important to preserve just for the enrolled members who support this site's mission, people, and goals.  We're going to open up most of this report to the general public because we feel it's the right thing to do.  For those unfamiliar with my work, the job I do most frequently is a combination of information scout (I connect dots) and analyst (I dig deep). 

Okay, let's head deeper into the World Energy Outlook (WEO) 2010 report.  Here's my quick summary of the report.  

By 2035:

  • Between 2008 and 2035, total energy demand grows by 36%, or 1.2% per year; far less than the 2% rate of growth seen over the prior 27 years. (Note:  This comes from the "New Policies Scenario," which is the middle scenario of three in the report. We'll discuss this one throughout.)
  • Renewables will be contributing very little to the overall energy landscape, just 14% of the total, and this includes hydro.
  • 93% of all the demand increase comes from non OECD countries (mainly China and India).
  • Oil remains the dominant fuel (although diminishing in total percentage).
  • The global economy will grow by an average of 3.2% per annum.
  • It's time to cut demand for oil by raising prices (they recommend ending energy subsidies for fossil fuels as the mechanism).
  • Conventional oil has peaked, and this is a permanent condition.  All oil gains from here forwards will come from non-conventional sources and gas and coal-to-liquids programs.

There are enormous implications to that series of bullet points, if one stops to think about them in total.  One glaring difficulty in all of this is that the IEA notes that China and India are going to consume nearly every drop of any potential future increases in oil production.  Yet overall production is only going to grow by a meager 0.5% per year.

So how does the IEA suppose that oil growth can slow down to a paltry 0.5%/year, see China and India increase their consumption massively, and still have everything balance out?  We all know that China and India (et al.) have been growing their oil consumption by massive percentages in the recent past, and there's some evidence that we can expect more of that behavior in the years to come.

In fact, this was what India's Premier told the world on November 1, 2010:

Premier Manmohan Singh told India's energy firms on Monday to scour the globe for fuel supplies as he warned the country's demand for fossil fuels was set to soar 40 percent over the next decade. 

The country of more than 1.1 billion people already imports nearly 80 percent of its crude oil to fuel an economy that is expected to grow 8.5 percent this year and at least nine percent next year.

(Source)

So, yes, it's pretty much expected that China and India, et al., will be increasing their consumption by rates much (much) higher than 0.5%, which means, logically, that some other countries will have to consume at negative rates in order for the equation to balance.

And this is exactly what the IEA has modeled and proposed:

I want to draw your attention to the green circles that I placed on there.  Yes, you are reading that right.  To balance everything out, the IEA has modeled the OECD as actually decreasing its consumption of coal and oil by significant amounts (that's what a negative 'incremental demand' requires:  a decrease in current consumption).  The difference is made up from a mix of renewables, biomass, nuclear, and natural gas. 

Never has such a thing happened in the entire industrial history of the OECD.  Never.  There are no models or examples to follow here.  No guidance is offered to suggest how such a monumental feat will be accomplished, beyond tossing a few more bucks at renewables, as if money alone could correct for vast differences in energy quantity and quality. 

To suggest that the next 25 years for the OECD will be characterized by a significant reduction in the use of the two primary industrial fuels is an astonishing claim, and so it deserves to be carefully examined.  But, speaking bluntly, this is not going to happen.

Any suggestion that the OECD is going to reduce its use of coal for electricity and oil for liquid fuels has to be accompanied by evidence of massive programs of investment towards energy transitioning that, truth be told, have to have been started a decade or more before the arrival of Peak Oil.  Hinting that it might possibly be a good idea to move these renewable dreams to the drawing board after the advent of Peak Oil is akin to playing tunes on a sinking ship; at best, you are providing a captivating diversion.

Regardless, no such programs operating at appropriate scale are even remotely in sight.

A point that I try to make clear in my upcoming book (due out in March 2011 from Wiley) is that such an energy transition would be evident by such things as the trillions of dollars being dedicated to it, by eminent domain actions to secure new land for natural gas pipelines, and by vehicles that could run on electricity or natural gas being churned out by the millions.  While we can debate whether we might get there someday, there can be no doubt that we are not there today.

So if one is a card-carrying member of the mainstream media, what does one do with such a major event as the WEO 2010 report?  In the case of the New York Times, the answer is to run a completely schizophrenic pair of articles, but bury the supportive one deep in the "blogs" section while placing the one that completely ignores the WEO 2010 report prominently in the business section.

The first of these two articles, separated by only a day and centering firmly on the IEA report, is titled "Is ‘Peak Oil’ Behind Us?" to which the article correctly answers "Yes":

Is ‘Peak Oil’ Behind Us?

Peak oil is not just here — it’s behind us already

That’s the conclusion of the International Energy Agency, the Paris-based organization that provides energy analysis to 28 industrialized nations. According to a projection in the agency’s latest annual report, released last week, production of conventional crude oil — the black liquid stuff that rigs pump out of the ground — probably topped out for good in 2006, at about 70 million barrels a day. Production from currently producing oil fields will drop sharply in coming decades, the report suggests.

That's pretty accurate.  You'd think that such a stunning admission by the preeminent body responsible for preparing such reports for the OECD would have sparked a fury of investigation and maybe even self-investigation by the New York Times, which through the years has pooh-poohed the entire idea of Peak Oil rather religiously.  But that didn't happen.

The second article is entitled "There Will Be Fuel" and is chock full of comforting anecdotes and quotes from oil industry executives: 

There Will Be Fuel

Just as it seemed that the world was running on fumes, giant oil fields were discovered off the coasts of Brazil and Africa, and Canadian oil sands projects expanded so fast, they now provide North America with more oil than Saudi Arabia. In addition, the United States has increased domestic oil production for the first time in a generation.

“The estimates for how much oil there is in the world continue to increase,” said William M. Colton, Exxon Mobil’s vice president for corporate strategic planning. “There’s enough oil to supply the world’s needs as far as anyone can see.”

Somebody get that man a pair of glasses (!)

Seriously, any country or corporation that cannot foresee the end of cheap and abundant oil is being run by dangerous people.  To suggest that even the most optimistic assessment of oil, which has it peaking in 2030, is too far away to begin planning for today is just silly.  Really, now...responsible planners considering major capital projects with multi-decade life spans (which can be 30 years or more for many things) should just ignore energy?    That's the message here?  Goodness, gracious. 

In fact, there are so many problems with "There Will Be Fuel" that I hardly know where to turn to next.  I suppose we could note that the article quoted "100 years of natural gas" left in the US without mentioning the all-important phrase "at current rates of consumption."  To those who are familiar with exponential processes, and who know that energy consumption has been increasing exponentially for decades, such an oversight is an enormous red flag.  It betrays either ignorance or deception on somebody's part (perhaps the editor?), and neither are acceptable at this stage of the energy debate.  Once we increase consumption at reasonable and prior rates, that 100 years can rapidly shrink to mere decades in a hurry.

What's the difference between "100 years of gas" and "maybe a couple of decades"?  Night and day.

Next, we might note that the article goes out of its way to make the case that "estimates for how much oil there is in the world continue to increase," while somehow avoiding the essential point that it's not the amounts that matter, but the rates at which the oil can be coaxed to flow out of the ground.  Peak Oil is, has been, and always will be about flow rates, not amounts.

For example, if the very center of the earth were entirely filled with oil, but we could only get to it through a single, very thin tube (limiting how fast we could pull the oil out), it wouldn't really matter how much was there - a hundred trillion barrels could be there - because how much we could do with it would be limited by the rate of extraction.  Exponential economic growth requires increases in fuel consumption.  It always has and it always will, until and unless a brand new model of economics is developed.

Again, the lack of awareness of this basic concept of the difference between rates and amounts leaves the New York Times piece very much in doubt. 

I could go on, but it's not all that helpful to once again catch the New York Times playing fast and loose with the facts in order to advance an agenda; for now, let's just observe that Peak Oil refers to a condition where the rate of extraction cannot be increased.  If it were about amounts, then I suppose we would call it "Peak Reserves," but it's not, and for a reason:  We care about the flow rates.

It is on this matter of flow rates that the IEA report was especially jarring and succinct:  Peak Oil has happened.

At this point, it may be good to remind ourselves that last year an IEA whistleblower said that the organization had willfully underplayed looming shortages due to political pressures from the US.

Please read the following very carefully; it represents very important context for what we are about to discuss next.  (I'm quoting at length because it's all essential): 

The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.

The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.

The allegations raise serious questions about the accuracy of the organisation's latest World Energy Outlook on oil demand and supply to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies.

Now the "peak oil" theory is gaining support at the heart of the global energy establishment. "The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year," said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. "The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this.

"Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources," he added.

A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.

(Source)

The idea expressed above is simple enough:  The oil data has been fudged to the upside by the IEA.  Pressure has allegedly been applied upon the IEA to paint a rosier picture than a strict interpretation of the data would warrant.  To speculate, the reason why is that there are a host of interlocking vested interests in the financial but especially political spheres that would find the public recognition of Peak Oil to be disruptive and therefore unwelcome. 

This is just another example of Fuzzy Numbers, but the consequences of fibbing to ourselves about oil are far more dire than when we lie about employment.  If it weren't so serious, it would be just another somewhat regrettable obfuscation of reality created to serve narrow and temporal political purposes.

Note: There is a well-recorded history, going back at least 13 years, of the IEA being fully aware of Peak Oil but bowing to political pressure to soften the message.  Read paragraphs 4 & 5 of this piece by Colin Campbell for some more essential background.

Conclusion

Here's where we are:

  • The IEA has known about looming Peak Oil issues for more than a decade and is only now explicitly recognizing the idea in their public documents.
  • People inside and outside of the IEA say that the organization has downplayed both the timing and potential severity of Peak Oil.
  • Peak Conventional Oil has already happened.
  • Any possible growth in future oil that the IEA can envision -- and we might suspect that even this is fudged to the upside and will retreat in subsequent reports -- is going to be almost entirely eaten up by China and India.

What this means is very, very simple.  There will be an energy crisis in the near future that will make anything we've experienced so far seem like a pleasant memory. 

The very best personal investments you can make at this stage will involve increasing your energy resilience.  Make your house require less heating and cooling, use the sun wherever and whenever possible, and increase your personal storage of the fuels you use (if and when possible).

The potential knock-on effects of less energy to the complex system known as our economy are unpredictable in their exact details and timing, but are thoroughly knowable via their broad, topographical outlines.  The economy will become simpler and less ordered. 

In Part III of this report, we explore the the answer to: "What should the investor (individual, institutional, private equity, or hedge fund) do next with this information?". Click here to access Part III  (free executive summary; paid enrollment required to access).





Related content

64 Comments

osb272646's picture
osb272646
Status: Silver Member (Offline)
Joined: Mar 14 2010
Posts: 120
Re: It's Official: The Economy Is Set To Starve

Considering that fossil fuels are in their last stages of utility, what's the implication for global warming?  The primary source of CO2 is declining by itself; which means that global warming is a self correcting event, over the next hundred years or so.  Even if global warming is real, and dangerous to humanity, to me it's always been as obvious as the age spots on the back of my hand that when oil and coal production dry up, this problem goes away.

Would make sense to me to redirect our efforts at reducing global warming (if there really are any efforts beyond the hot air at the annual summits), toward closing this energy gap.  Probably too late for that now.

Augustine's picture
Augustine
Status: Bronze Member (Offline)
Joined: Oct 13 2009
Posts: 36
Re: It's Official: The Economy Is Set To Starve

Why would the OECD countries just magnanimously abdicate of their growth in favor of China and India?  Why would the growth in future oil automatically go to these countries?  I guess, not willingly.  In other words: over our dead bodies.

What a great way to get into another century: WWIII! Cry

bmc's picture
bmc
Status: Member (Offline)
Joined: Sep 1 2009
Posts: 13
Re: It's Official: The Economy Is Set To Starve

I'm confused by something from Part 1.

CM writes "In order to keep conventional oil flat, we have to move up to the third band (light blue), which goes by the spine tingling name "fields yet to be found" - which will apparently be delivering a very hefty 22 mbd by 2035.  In other words, the IEA is projecting that in 25 years, more oil will be flowing from "fields yet to be found" than from all the fields ever found and put into production by the year 2010. "

If the current production from existing sources is over 60mb/d and the projection for "fields yet to be found" is ~22mb/d; then isn't the IEA actually saying that approximately one-third of today's production will come from "fields yet to be found"? How is 22 mb/d interpreted to be more than 60+mb/d?

What am I missing?

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1844
Carbon?

Quote:

Considering that fossil fuels are in their last stages of utility, what's the implication for global warming?

Think coal. Coal will continue to be used - China builds a new coal-fired plant every week. Its use may increase to compensate for oil availability decreases. Especially if power to electric vehicles is needed.

However, I believe climate change is considered controversial here, so I'll end my post now.

Poet

Quercus bicolor's picture
Quercus bicolor
Status: Silver Member (Offline)
Joined: Mar 19 2008
Posts: 245
Re: It's Official: The Economy Is Set To Starve

Here's an exercise that might help us understand how accurate the "fields yet to be developed" and "fields yet to be found" have been:

  1. Look at past years reports - as far back as they have been reporting oil production using the current categories.
  2. Look at the future production projections for that year of conventional oil (the sum of currently producing fields, fields yet to be developed, fields yet to be found) out to 2010.
  3. Compare to actual production figures and see how they did.

Has anyone done this?

If not, is anyone willing to try it and post their findings?

Reuben Bailey's picture
Reuben Bailey
Status: Silver Member (Offline)
Joined: Mar 17 2008
Posts: 138
Re: It's Official: The Economy Is Set To Starve

BMC,

   It's a matter of timing. As I read it, what Chris is getting at has to do with what the report is telling us will be happening in 25 years. If their report is accurate, they are telling us that more oil will be flowing from "fields yet to be found" (~22 MBD / light blue) than from those that are currently producing in 2010 (~15 MBD / dark blue).

   In other words, in 25 years, the IEA expects more production per day from fields that may or may not exist than from all the fields that have ever produced as of 2010.

bmc's picture
bmc
Status: Member (Offline)
Joined: Sep 1 2009
Posts: 13
Re: It's Official: The Economy Is Set To Starve

@ Reuben:

OK. Thanks-- it makes perfect sense to me now.

jturbo68's picture
jturbo68
Status: Silver Member (Offline)
Joined: Aug 4 2009
Posts: 193
Re: It's Official: The Economy Is Set To Starve

osb272646 wrote:

Considering that fossil fuels are in their last stages of utility, what's the implication for global warming?  The primary source of CO2 is declining by itself; which means that global warming is a self correcting event, over the next hundred years or so.  Even if global warming is real, and dangerous to humanity, to me it's always been as obvious as the age spots on the back of my hand that when oil and coal production dry up, this problem goes away.

Would make sense to me to redirect our efforts at reducing global warming (if there really are any efforts beyond the hot air at the annual summits), toward closing this energy gap.  Probably too late for that now.

There is plenty of Oil/Coal and NG remining to exacerbate the issue, 'IF' we really strive go after all the remaining.  At peak, there is about 50% left.  As stated above, it is a flow problem, not an amount problem.

In the case of coal, we increase the quantity of low quality ore (to get equivalent BTUs), which is even higher in carbon content than high quality ore.  Also Coal to liquids generate far higher carbon output in conversion than the use of conventional oil.  Tar Sands generate far more CO2 for the oil equivalent than conventional oil.

The question is will be able to persue these more intensive practices once decline takes hold.  Arguable. But ...

That depends on the EROEI. .... we can and will go as far down the path as possible.

wfhyslop's picture
wfhyslop
Status: Bronze Member (Offline)
Joined: Sep 3 2008
Posts: 46
Re: It's Official: The Economy Is Set To Starve

Great analysis as always Dr. Martenson.

However, what happens to this analysis if we experience deflation over the next few years and thus contracting economic growth and thus lower oil consumption (or stagnant oil consumption). Currently total credit outstanding in the US is still contracting despite the best efforts of the Fed to print money (that is the US is currently in deflation). The Fed has already "printed" 1.5 trillion without any noticeable affects on credit expansion, employment, or inflation.

Japan has been "quantitative easing" for years and using massive fiscal stimulus but they have been in mild deflation for 20 years.  Why won't the same thing happen to the US?

I having been reading this site for over 2 years - but I hedge my bets by reading other analysts such as Bob Prechter and Mish (Mike Shedlock). All agree that we are headed for major trouble and people need to prepare - they just differ on whether we face an inflationary or deflationary future. In some ways it does not matter (basic precautions you suggest for food, water, shelter, etc.) but as far as investing it does.  If inflation then gold, land, and other pysical things. If deflation then US dollars or T-Bills.

I still am not sure. I was wondering if you could expand on your argument why deflation is not possible (or highly unlikely),

Thanks,

Will

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: It's Official: The Economy Is Set To Starve

Chris, you wrote: "Seriously, any country or corporation that cannot foresee the end of cheap and abundant oil is being run by dangerous people."

I don't think it's lack of foresight at all.....  they're just lying to us!

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: It's Official: The Economy Is Set To Starve

jturbo68 wrote:

There is plenty of Oil/Coal and NG remining to exacerbate the issue, 'IF' we really strive go after all the remaining.  At peak, there is about 50% left.  As stated above, it is a flow problem, not an amount problem.

In the case of coal, we increase the quantity of low quality ore (to get equivalent BTUs), which is even higher in carbon content than high quality ore.  Also Coal to liquids generate far higher carbon output in conversion than the use of conventional oil.  Tar Sands generate far more CO2 for the oil equivalent than conventional oil.

The question is will be able to persue these more intensive practices once decline takes hold.  Arguable. But ...

That depends on the EROEI. .... we can and will go as far down the path as possible.

http://aleklett.wordpress.com/2009/12/07/%E2%80%9Dthe-un%E2%80%99s-futur...

Globally, human activity generates greenhouse gasses and emissions increase at the same rate as the population increases. Today, 57% of greenhouse gasses come from fossil fuel. The big issue in Copenhagen is future emissions from these fossil fuels. I have a different view of the situation than the IPCC and my view is based on scientific publications from the Global Energy Systems research group at Uppsala University, Sweden. We can now show that almost all of the IPCC emissions scenarios are improbable and that those scenarios described as “Business as Usual” are completely unrealistic. (Ten publications relevant to this article can be accessed from the home page of Global Energy Systems, www.fysast.uu.se/ges)

In May 2007 the Debate column of Dagens Nyheter [Sweden’s most widely read broadsheet newspaper] published my article on climate titled, “Severe climate change unlikely before we run out of fossil fuel”. An article with the title, “The Peak of the Oil Age” has recently been published in the scientific journal Energy Policy. From the research reported in that paper we can now state that there will be insufficient oil in future since production will decline. Therefore, emissions from use of oil will decline by at least 10% by 2030. This reduction will be even greater if the global economy is negatively affected.

The climate change negotiators main question should therefore be, “How will we use coal in the future?”.

Today’s coal production – hard coal and brown coal – is approximately 3000 million “tonne of oil equivalent” (toe). For the “Business as Usual” scenarios coal production must increase seven-fold by 2100. That is an increase of 600%. In the last 20 years, global coal reserves have been revised downwards by 25%. The most recent case was India that halved its declared reserves. The USA is the “Saudi Arabia of coal” with 29% of global reserves. The former Soviet Union has 27%, China 14%, Australia 9%, India 7% and South Africa 4% of global reserves. That means that 90% of the fossil coal reserves exist in these six nations. We can also assert that the same six nations today produce 86% of the world’s coal.

If emissions from coal are to increase by 600 percent this cannot occur without the USA – that has the world’s largest coal finds – increasing its coal production by the same amount. In an article published in May 2009 in the International Journal of Coal Geology we have studied the historical trends and future possible production of coal in the USA. The production of high-grade anthracite is decreasing while the production of brown coal in Wyoming is increasing. Future coal production is completely dependent on new coal mining in the state of Montana. According to the constitution of the USA, federal authorities cannot force Montana to produce coal. In Montana they do not want to produce coal since the mining will destroy the environment and large areas of agricultural land. If the constitution is changed and mining of coal in Montana does occur it is possible for the USA to increase its coal production by 40% but not by 100%. An increase of 600% is pure fantasy.

Today, the world’s largest coal producer is China. Its reserves of coal are half the size of the USA’s and China has no possibility of increasing its coal production by 100%. A 600% increase there is also pure fantasy. Russia, with the world’s second largest coal reserves, can increase its production significantly but the untouched Russian coal reserves lie in central Siberia in an area without infrastructure. Russia is not dependent on this coal for its own energy needs but if mining did begin there some time after 2050 it could only ever be equivalent to a small fraction of today’s global production. Therefore, it is impossible for global coal production to increase by 100% and 600% is, once again, pure fantasy.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: It's Official: The Economy Is Set To Starve

wfhyslop wrote:

I having been reading this site for over 2 years - but I hedge my bets by reading other analysts such as Bob Prechter and Mish (Mike Shedlock). All agree that we are headed for major trouble and people need to prepare - they just differ on whether we face an inflationary or deflationary future. In some ways it does not matter (basic precautions you suggest for food, water, shelter, etc.) but as far as investing it does.  If inflation then gold, land, and other pysical things. If deflation then US dollars or T-Bills.

If you have "investment worries" after reading Chris' excellent analysis......  you're doing it WRONG!  I never cease to be stumped when I read stuff like this here......

If you have "investments", it means to me you have excess or spare wealth.  So if you have "spare wealth" (lucky you!) isn't it obvious you should do as Chris says and invest this loot in "food, water, shelter, etc."?

We have now spent ALL our "excess wealth".  Our bank balance is rarely over $500, usually much less.....  When I've saved enough, I buy stuff that will be useful in a post crash situation.  I've just bought two piglets, a welder, and some steel to start building my new shed...  Oh and while we still had some cash left from my wife's recently cashed in superannuation, we bought an extra 2.2kW of PVs feeding the grid at a premium rate, making us $150 in the first month.  Our electricity supply is also secure, we thunb our noses at blackouts too.

AFAIC, that is way better than buying gold....... or the stock market, or....  and I never lose sleep over this strange inflation/deflation worry people here discuss ad nauseum.  I really couldn't give a hoot about the possibility of our propery value going down even ridiculous amounts like 80+%.....  we own it and that's all that matters.

guardia's picture
guardia
Status: Platinum Member (Offline)
Joined: Jul 26 2009
Posts: 592
Re: It's Official: The Economy Is Set To Starve

Wow, Gmail labeled as spam the newsletter message right away, for the first time!! The distribution list must be getting large :) Congrats

Samuel

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 3510
Re: It's Official: The Economy Is Set To Starve

wfhyslop wrote:

Great analysis as always Dr. Martenson.

However, what happens to this analysis if we experience deflation over the next few years and thus contracting economic growth and thus lower oil consumption (or stagnant oil consumption). Currently total credit outstanding in the US is still contracting despite the best efforts of the Fed to print money (that is the US is currently in deflation). The Fed has already "printed" 1.5 trillion without any noticeable affects on credit expansion, employment, or inflation.

Japan has been "quantitative easing" for years and using massive fiscal stimulus but they have been in mild deflation for 20 years.  Why won't the same thing happen to the US?

I having been reading this site for over 2 years - but I hedge my bets by reading other analysts such as Bob Prechter and Mish (Mike Shedlock). All agree that we are headed for major trouble and people need to prepare - they just differ on whether we face an inflationary or deflationary future. In some ways it does not matter (basic precautions you suggest for food, water, shelter, etc.) but as far as investing it does.  If inflation then gold, land, and other pysical things. If deflation then US dollars or T-Bills.

I still am not sure. I was wondering if you could expand on your argument why deflation is not possible (or highly unlikely),

Thanks,

Will

First, in regards to an earlier comment -  thanks, Reuben! - you did a better job articulating that point than I did...and got it exactly right.  The idea that we'll be producing more oil from fields that may or may not exist in 25 years than from all of the fields currently in production (i.e., "all of history") is quite a thought, is it not?

Will, your question gets right to the heart of things.  Both camps - the Krugman-style monetarists and strict deflationists - hold the paper in their minds as fixed elements, just in opposite directions.  The monetarists assume we can fix everything by just ramping up our production of more money and money equivalents while the deflationists assume that existing paper (debts) will drag the whole thing down.

Neither seems to be focusing on what happens if the very fount of the wealth that debt/money is laying claim to heads into decline.  That's what we do here, and it's just another point of view.

In our world, the energy is primary to the expressions of wealth (such as paper), which are secondary.

So the real question for those focused on the potential deflationary outcomes is this:  Will the rate of debt destruction outpace the speed of the energy decline?  If the answer is "yes," then we might expect all of the usual and customary deflationary effects.  If the answer happens to be "no," on the other hand, then we might expect some entirely different effects, such as inflation of energy and related prices and other "non-intuitive" results.

It all depends on one's frame of reference.

wfhyslop's picture
wfhyslop
Status: Bronze Member (Offline)
Joined: Sep 3 2008
Posts: 46
Re: It's Official: The Economy Is Set To Starve

Chris, Thanks for the excellent response to my post.  It is a very interesting perspective that I have not seen before on inflation/deflation (even on this site). I think you have nailed it with your quote:

"Will the rate of debt destruction outpace the speed of the energy decline?"

So if the debt destruction (causing energy demand destruction) can balance the decline in energy supply, we could have a "muddle through" (John Maudlin) scenario for a few years before it tips one way or the other?  That is, hopefully a longer timeframe for people to prepare?

Thanks,

Will

joelandsonia's picture
joelandsonia
Status: Bronze Member (Offline)
Joined: Mar 25 2010
Posts: 30
Will debt destruction outpace energy decline

I agree -- never thought of it in those terms before.

Going to mull that one over some turkey this weekend....

corbly's picture
corbly
Status: Member (Offline)
Joined: Nov 7 2010
Posts: 7
Re: It's Official: The Economy Is Set To Starve

somebody posted this on the site a few days ago: http://www.forecasts.org/. they have gold trading sideways for the next couple of years. next to chris' watch the crash course it's the best indicator around. i agree with chris to dollar cost averaging bullion buys, but does anyone here really agree with james turk, sinclair, etc. that gold will rally? if so, prove it to me.

andrewp111's picture
andrewp111
Status: Member (Offline)
Joined: Nov 24 2010
Posts: 2
Re: It's Official: The Economy Is Set To Starve

The chart showing coal and oil consumption declining in the OCED countries is truly striking. Think about it. Now you know what cap n' trade is really for.  We have to cut our consumption so China and India can expand. This is the price of maintaining global peace. If this does not happen, war over resources becomes inevitable.

Surely the politicians know this. So why don't they level with the public?

andrewp111's picture
andrewp111
Status: Member (Offline)
Joined: Nov 24 2010
Posts: 2
Re: It's Official: The Economy Is Set To Starve

Damnthematrix wrote:

......Future coal production is completely dependent on new coal mining in the state of Montana. According to the constitution of the USA, federal authorities cannot force Montana to produce coal. In Montana they do not want to produce coal since the mining will destroy the environment and large areas of agricultural land. If the constitution is changed and mining of coal in Montana does occur it is possible for the USA to increase its coal production by 40% but not by 100%. An increase of 600% is pure fantasy.

There are also vast reserves of uranium in Virginia that the state has prohibited from being mined. Essentially, the State is saving the resources for a future time when the prices go high enough.  Montana will probably do the same with its coal. Ultimately it all comes down to price.

AinSophAur's picture
AinSophAur
Status: Member (Offline)
Joined: Sep 25 2009
Posts: 18
Re: It's Official: The Economy Is Set To Starve

Go Solar ASAP!!!

britinbe's picture
britinbe
Status: Gold Member (Offline)
Joined: Dec 28 2008
Posts: 381
Re: It's Official: The Economy Is Set To Starve

Damnthematrix wrote:

Chris, you wrote: "Seriously, any country or corporation that cannot foresee the end of cheap and abundant oil is being run by dangerous people."

I don't think it's lack of foresight at all.....  they're just lying to us!

Mike

As I write this, I'm sitting in a fully airco'd hotel lobby in Dubai listening to pianist playing classical music; its a fantastic city but it feels so unreal and plastic and here in is the big lie; I took the kids to EuroDisney a few weeks ago and I get similar feeling.

I tested the water at work wrt to peak oil and got blank looks and so I explained things a bit further, focusing on flows and refining capacity etc in the face of growing demand from China and India, again blank looks. I came to the conclusion that most political and business leaders believe in their own hubris and their own brilliance to resolve any issue, after all is there any business that doesn't talk about fire fighting; they don't want to tackle problems, they only want to manage the outcomes of predicaments the best way they can. This to me makes these people truely dangerous. The politicians will contine to lie for as long as they can.........

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: It's Official: The Economy Is Set To Starve
Giles Parkinson

For years, David Mills, the eminent solar energy technology developer, has dreamed of creating a new model for an energy system that does away with the conventional design of massive baseload infrastructure.

Next week the newly-retired founder of solar thermal technology company Ausra (now owned by French nuclear giant Areva), and a former leading researcher at UNSW, will present that model.

Using hourly data for energy use of the entire United States economy in 2006, Mills will demonstrate how it could have been powered almost exclusively by wind and solar (with storage and the help of biofuels for aircraft and some biomass capacity for certain smelting operations).

The details of his findings, including capacity and costing estimations, will be released when he addresses the Australian Solar Energy Society's annual conference in Canberra next week. But in an exclusive interview with Climate Spectator, Mills gave a broad outline of his conclusions and suggested there was a surprisingly small difference in costs.

“Everyone says that you need flatline baseload capacity (such as coal or nuclear, or in some countries hydro) and build on that platform, and use load-following gas turbines,” Mills said.

“They assume that being baseload makes it cheaper, and all other things are more expensive.”

“What we are suggesting is a new paradigm. The traditional paradigm of flatline baseload does not exist in this scenario, but you need to understand that the replacement for baseload power is not another baseload, it’s a system of flexible and inflexible energy mechanisms based around wind and solar and other sources.”

The study is an extension of an idea that Mills has held dear for some time. In 2005 he presented a talk in Canberra suggesting that solar plans with a “primitive” storage model could run the electricity grid in eastern Australia.

Two years later, he did a similar study for California concluding that, based on hourly data for energy usage in 2006, solar could have carried well over 90 per cent of the electricity load.

The latest study – completed with a former R&D specialist at Ausra, Wei Li Cheng, and a US Department of Energy analyst Phil Larochelle – looks at how solar and wind could handle the entire electricity needs for the US in the same year, and also looks at whether it could handle the entire energy needs for the country, including transport.

Interestingly, wind and solar account for around 50 per cent each of the electricity supplies to handle summer demand and peaks, while more wind was used in winter. Such a system would require a capacity redundancy above peak demand, but would in fact be less than current systems.

Mills says the study looked to test a number of different premises. The first premise was that there was enough solar and wind that, in combination, could run the US economy. There was.

The second was that solar and wind would be connected with a new electricity transmission system, using high voltage direct current lines for the spine of the network, which will allow more flows and result in considerably reduced transmission losses.

These are the sort of networks being contemplated by the Desertec consortium founded by a group of large European industrial giants that are looking to source solar power from north Africa to provide some of Europe’s energy needs.

Mills says China is installing more HVDC lines than any other country in the world – looking to link coal plants with the Three Gorges dam and wind and solar from the north and west of the country. “It very clear to see what they are doing and that it is a very good thing to do,” he said.

Mills says the data used for his study came from 2006, and was based around technology that might be used in 2050, but exists now – even though its lack of scale makes current deployment expensive. "Its not technology that we don’t have now. I didn't want people saying that it's future technology."

He says the model would need to be refined to be implemented, but it provides food for thought. He says it could easily apply to the Chinese and Australian economies, which also benefit from a population largely based on the eastern seaboard, western deserts (which can provide power later into the evening to the eastern consumers), and strong wind resources.

The Mills model will add to the considerable debate about the role of renewables – whether they are a “worthy” but annoying addition to the current network systems, or if they can assume a prominent role in powering economies.

Mills notes the work of the Beyond Zero Emissions group, which outlined a highly contentious study into how Australia could go 100 per cent renewable by 2020 – not so much to suggest it should be done, but that it could be done.

The German industrial giant Siemens has also produced a report entitled “Picture the Future”, which suggested renewable energy could, by 2030, provide 70 per cent of Australia’s electricity needs, with half coming from solar – augmented by storage and a suite of installation across different time zones – and the rest made up of an equal share of wind and geothermal.

debu's picture
debu
Status: Silver Member (Offline)
Joined: Aug 17 2009
Posts: 133
Re: It's Official: The Economy Is Set To Starve

"Will the rate of debt destruction outpace the speed of the energy decline?"

This is a very interesting angle to consider, one that hadn't occurred to me previously.

In a similar vein, Dr. Tim Garrett from the University of Utah argues that  increasingly chaotic climate conditions will be inherently inflationary in nature.  I confess that while not being up to making sense of the paper supporting his case (http://arxiv.org/abs/1010.0428) Alex Smith's interview of Garret in the latest episode of Radio Ecoshock is easily understandable to mere laymen (http://www.ecoshock.org/eshock10.html) or for a transcript see http://209.217.209.33/~esorg/transcripts/ES_Garrett_Transcript.htm

This, too, seems intuitively right -  property damage or crop failures, for example, will destroy much wealth that we will try at great cost in $ and resources to replace.  Again, I hadn't thought of the issue in those terms before (stunted imagination?).  There is much more to Garret's theory so if curious have a peek at Smith's blog (http://www.ecoshock.info/) to begin with.

In any case, the Ecoshock weekly podcast is always worth a listen, if sometimes a little depressing.

FMagyar's picture
FMagyar
Status: Member (Offline)
Joined: Nov 24 2010
Posts: 2
Re: It's Official: The Economy Is Set To Starve

"Seriously, any country or corporation that cannot foresee the end of cheap and abundant oil is being run by dangerous people.

I think the some of  the ones that can forsee the end of cheap and abundant oil can be even more dangerous...

IMHO one of the scariest recent news stories about the world in which TPTB live.
http://www.fastcompany.com/1704559/rupert-murdoch-dick-cheney-Genie-energy

<blockquote>"Genie is a new face in the energy market; the company just launched this summer.

Murdoch is slated to join Genie's advisory board. Other members include:

        American Shale Oil CTO Alan K. Burnham
    
      Former Vice President Dick Cheney
    
      Genie chairman and Midland, Texas mayor Wes Perry
    
      Former Exxon Mobil executive vice president Eugene A. Renna
    
      Allan Sass, former president and CEO of Occidental Oil Shale
    
      Hedge fund investor and philanthropist Michael Steinhardt
    
      Stephen M. Trauber of UBS Investment Bank
    
      Harold Vinegar, former chief scientist at Royal Dutch/Shell

American Shale Oil is a joint venture between IDT and French firm Total S.A.

Public statements by both Genie and their investors have stressed the firm's American and Israeli (read: non-Arab, non-Iranian, non-Venezuelan) roots. According to a statement by Murdoch, “I believe Genie Energy's technologies and vast shale oil licenses have real potential to spur a global, geo-political paradigm shift by moving a major portion of new oil production to America, Israel, and other western-oriented democracies.” </blockquote>

This is *NOT* the paradigm shift that the world needs at this time!

Good luck to the rest of us...

nex_s's picture
nex_s
Status: Member (Offline)
Joined: Jul 30 2010
Posts: 17
Re: It's Official: The Economy Is Set To Starve

  In relation to what britinbe said, I understand and I feel your pain :)  I mention peak oil to some and if I don't get the blank stares I get total denial or "big oil is just out to gouge the average person".  They fail to see the big picture and don't understand that gouging customers is essentially counter-productive to the oil industry since it means many will simply use less meaning less revenue.

I always say consider the source.  The way Chris delivers his analysis, the Crash Course, the website, and any appearances shows someone who is forthright, intelligent, analytical, professional, believable, yet clearly alarmed at our current situation.  I highly respect his work and anyone seeing or hearing his work for the first time would soon feel the same way (or that's what you'd hope).  With this most recent analysis he makes the case that we're in serious trouble and have very very little time to prepare.  Nevertheless, there are those who will not believe even when presented with clear numbers.  To believe would require such a paradigm shift that for many it's unfathomable.  They would rather ride this sick donkey to the very end and deal with whatever comes with eyes shut.  I've been forwarding links to friends and family from Chris' site and others and surprisingly some are actually starting to stand up and listen.  I've had a hard time convincing my wife yet have done some preparation (reducing energy use, buying precious metals, etc) for which she wasn't very happy.  But I'm willing to put up with a bit of 'resistance' :) knowing it'll be worth it later on.  As Nicole Foss says I'd rather be a year early than 5 minutes late.

  There are people who will continue to believe the MSM media right to the end.  They use phrases like "economy sluggish", "recovery slowing", "Unemployment dropped by .00001%".  But I wonder at what point do you declare we never left a recession or are on our way to a depression.  I suspect the MSM, when reporting sunset, would say at dusk "sunlight showing signs of diminishing" when they should really be saying "darkness will soon be upon us" literally and figuratively!

To everyone spreading the word, keep up the good work because if you manage to help prepare just one other person, then that person might be in a position to help someone else.

nex_s

jrf29's picture
jrf29
Status: Gold Member (Offline)
Joined: Apr 18 2008
Posts: 445
Re: It's Official: The Economy Is Set To Starve

While the investment implications are very interesting, and the economic effects fascinating, I cannot stop thinking of the the enormous significance of this time in human history.

There have been historical moments of enormous significance, when one period ends and another one begins.  476 AD for example.  But never before should educated people all over the world have been able to recognize the tipping point, and know its significance, at the time it happened. 

I wonder how historians will characterize this time, 1,000 years in the future.  Perhaps a book entitled,

The World of 2010: Sleepwalking into the Future

toddf's picture
toddf
Status: Member (Offline)
Joined: Nov 24 2010
Posts: 5
Re: It's Official: The Economy Is Set To Starve

In my humble opinion, Peak Oil is just a fallacy.  A ruse constructed by current paradigm behemoths in order to control the planets most precious resource.  When in fact, Oil is actually plentiful if Russian oil extraction techniques be employed.  Cheney's move to annex Yukos (that subsequently failed when Putin quashed those efforts) was the first of many salvos aimed at supressing the abiotic nature of oil.  How is it that Russia has overtaken Saudi Arabia as the worlds top Oil producer when in fact, Saudi Arabia  is the undisputed king of proven oil reserves?

A. M.'s picture
A. M.
Status: Diamond Member (Offline)
Joined: Oct 22 2008
Posts: 2345
Re: It's Official: The Economy Is Set To Starve

Toddf,

You've made a couple assertions:
1. Oil is plentiful, contingent on extraction techniques.
2. Oil is Abiotic.

Since your contention/conclusion seems to hinge on these two arguments, would you care to elaborate, site credible sources and explain how they relate to ERoEI?

Assertions without backing are not generally worthy of using to draw conclusions.
Please explain a little better, because even if you're assertions are correct, they don't negate the Peak Oil argument.

Cheers,

Aaron

Ready's picture
Ready
Status: Platinum Member (Offline)
Joined: Dec 30 2008
Posts: 914
Re: It's Official: The Economy Is Set To Starve

toddf wrote:

abiotic nature of oil

Has been completely and utterly debunked in many places, inlcuding here.

If you have new, solid info from a source that can be verified and trusted, please share it. It is customary on this site to provide data / links to back up claims such as yours in order to be taken seriously.

toddf's picture
toddf
Status: Member (Offline)
Joined: Nov 24 2010
Posts: 5
Re: It's Official: The Economy Is Set To Starve

appreciate the feedback.  To your point, given that most of the worlds scaled extraction techniques are based on extracting the easy oil, abiotic oil doesn't negate the peak oil argument.  In fact, perhaps macondo is evidence of that notion as extraction has proven to be somewhat challenging (especially doing so a mile under water). 

As for backing up my assertions, there are ways to test the age of the oil by measuring the thorium content-- the premise being that oil less than perhaps a hundred years old supports the idea that oil is a natural process.  However as one might suspect, i'm not aware of any such study as clearly, vested interests have little to gain if proved out.

Regarding something as fiery and impactful as Oil going from a scarce resource to a plentiful resource, i'm afraid we can only rely on anecdotal evidence but i think enough clues are out there for the master detective to arrive at the proper conclusion.  I offer Russain oil geology and her current oil production numbers and macondo's seemingly endless supply of oil as such evidence.  That said, it's probably not in mother earths best interest for any more oil to be pulled from her (bowels)...

to borrow your quote, "Fluidity is the way to life. Fixation is the way to death"

toddf's picture
toddf
Status: Member (Offline)
Joined: Nov 24 2010
Posts: 5
Re: It's Official: The Economy Is Set To Starve

nm

toddf's picture
toddf
Status: Member (Offline)
Joined: Nov 24 2010
Posts: 5
Re: It's Official: The Economy Is Set To Starve

respectfully, not sure what part of abiotic oil has been debunked.  Proving that oil does form from organic processes doesn't in itself disqualify non-organic formation of oil.  Take vegetable oil and liquid methane on ios for example.  The body of evidence from russian academie warrants that abiotic oil be brought in to any discussion concerning the planets capacity to produce energy in the future.  furthermore, how is it that oil can be recovered at depths of 30,000 feet when organic matter collects at lesser depths.  I am not of the opinion that abiotic oil can be ruled out as a potential answer to the worlds energy needs.

Alas, russia's oil production will be the true test.  Set to peak in 1987, she has recently overtaken saudi arabia as the worlds largest producer of oil.  her ability to continue to produce oil at current levels into the future will potentially add clarity to this fascinating debate.

here's a website i found helpful on non-organic oil.

http://www.gasresources.net/

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 3510
Re: It's Official: The Economy Is Set To Starve

toddf you have not provided any evidence or data to back up any of your assertions.  Loosely citing that current Russian production numbers are up doesn't count.  And Macondo was and is not "endless."

Without engaging too deeply here, because it's almost certainly a poor use of time until and unless you begin to deal in actual facts, we might note that Russia has been depleting its fields from west to east over time.  

Yes Russia has increased its overall production values but that's because they are steadily marching east, linking up their infrastructure to new fields.  When does that game end?  When they hit the Bering sea.  Ooops.  They're already there.

Here's a list of Russian fields that shows their date of initial exploitation and the percent depletion.

  • Povkhovskoye (1978) – 99%
  • Romashkinskoye (1949) – 85%
  • Ust-Balyk-Mamontovskoye (1964) – 85%
  • Samotlor (1964) – 73%
  • Federovo-Surgutskoye (1973) – 70%
  • Sugmutskoye (1995) – 67%
  • Pokachevsko-Uryevskoye (1977) – 63%
  • Tevlinsko-Russkinskoye (1986) – 49%
  • Malo-Balykskoye (1984) – 41%
  • Vatyeganskoye (1984) – 37%
  • Tyanskoye (1995) – 31%
  • Pravdinsko-Salymskoye (1968) – 29%
  • Priboskoye (1989) – 14%
  • Krasnoleninskoye (1985) – 13%

 

One might wonder, if the Russians have some secret ability to tap into abiotic oil which nobody else has, why they have exhausted fields in their stable of properties?

At any rate, we deal in facts and information here (always welcome!), but not uninformed speculation.  Plenty of other places to do that, however this isn't one of them.

 

toddf's picture
toddf
Status: Member (Offline)
Joined: Nov 24 2010
Posts: 5
Re: It's Official: The Economy Is Set To Starve

point taken, apologize if i've wasted anyone's time.  Realize that proving or disproving abiotic oil does little to address the current problem at hand.  I'll apply better judgement in the future and will certainly post items that i feel are appropriate for discussion on this forum. 

sebastian's picture
sebastian
Status: Member (Offline)
Joined: Feb 9 2010
Posts: 3
Re: It's Official: The Economy Is Set To Starve

So it seems obvious to me that the U.S. and other major economies are on the brink of  collapse. My question is, if this happens in the next couple of years and the global economy is severely hampered by how much will oil consumption drop?

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: It's Official: The Economy Is Set To Starve

Well, how long's a piece of string?

If there's no money to buy it with, or gas costs $20 a gallon......  I guess consumption could go through the floor!

FWIW, re abiotic oil, even if it was real, it's plainly obvious that nature isn't producing it fast enough to make any difference whatsoever...  Maybe in another 150 million years!

Mike

h5mind's picture
h5mind
Status: Member (Offline)
Joined: Nov 25 2010
Posts: 1
Re: It's Official: The Economy Is Set To Starve

For a truly eye-opening analysis of what we can expect of "life after Peak Oil", I heartily recommend Michael Ruppert's extraordinary work 'Crossing the Rubicon'.  It is the Bible on how governments have known about Peak Oil for many decades, and have worked relentlessly to keep the truth from you. 

Because most of us were born during the "modern" era, one thing we forget  is that prior to oil, world population levels stayed pretty low and stable for over 1,000 years.  Since the migration to an oil-based society 100 years ago, global population has increased six-fold.  100% of that was due to the miraculous applications for plentiful and cheap petroleum deposits.  Not just energy, but pesticides, plastics, communications, shipping, etc.  As was mentioned, there is no viable alternative waiting in the wings, ready to fill the void left by oil's passiing.  Remove oil from the picture, and billions of us will die, simple as that.   And we got to this point with a large part of the world still living in primitive conditions.  Imagine what will happen as China and India truly come online.

Having known what's in store for years,  it makes sense why our political leaders ignore or minimalize Peak Oil-- they want to keep Wall Street happy. Their interest at this point is to cash out their chips and provide for their own preservation in some far-off locale.  They anticipate oil shortages will be a self-correcting issue, as the "surplus population" is decreased due to starvation, war, and disease.  It also explains the massive build up of a US police state, as 300 million spolied, over-fed Americans (myself included) are unlikely to respond with gentle decorum when the brownouts and gas rationing start and the National Guard is called in for food riots at the local A & P. 

If you're still debating inflation vs deflation, you may want to ponder while perched on several months of food and necessities "just in case".  You don't want to call the wrong shot on this one and end up in the soup lines or one of FEMA's "Relaxation Centers". 

wheatgrassfarmer's picture
wheatgrassfarmer (not verified)
Re: It's Official: The Economy Is Set To Starve

Here's one promising technolgy for producing and upgrading extra-heavy (unconventional) oil insitu currently being piloted at Conklin in the Alberta oilsands and under commercial development at Kerrobert in Saskatchewan.

http://netenergy.theoildrum.com/node/5183

With an EROI of 56, THAI has the potential, with broad application, to turn the oil production clock back 50 years. There's 20 billion barrels of proven heavy oil reserves in Alberta and Saskatchewn alone. McDaniel has certified THAI enhanced recovery over SAGD. More technical info at http://www.petrobank.com/heavy-oil/thai-commercialization-process/ . Bringing it on stream in time to fill the gap in the light blue "unconventional oil" plot will be a challenge. However, if the alternative is starvation in North America, a "Manhattan Project" approach could solve that.....throw 10% of our current military budget at it.....$20,000 per flowing barrel CAPEX and $20/flowing barrel OPEX.......thats a huge amount of crude oil.

SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
Joined: Feb 11 2009
Posts: 2120
Re: It's Official: The Economy Is Set To Starve

Well, that article puts the EROEI for this new method 3.3 to 1.  That's about double the usual tar-sand EROEI.  Still pretty dang low.

Maureen Zika's picture
Maureen Zika
Status: Member (Offline)
Joined: Nov 25 2010
Posts: 1
Re: It's Official: The Economy Is Set To Starve

I was under the impression the U.S.A. was the Saudi Arabia of natural gas. Why not change vehicles to operate using natural gas? We would then only need 20% of imports.

A. M.'s picture
A. M.
Status: Diamond Member (Offline)
Joined: Oct 22 2008
Posts: 2345
Re: It's Official: The Economy Is Set To Starve

toddf,

You've certainly not wasted any time - I'd encourage you to think of this discussion as an opportunity to re-evaluate your information, evaluate the information provided here and start analyzing the probabilities.

If information is provided that Peak Oil is  fallacy, I'd be literally amazed.
However, that does not preclude the notion that there may be 'viable' answers to the energy deliema.
At present, however, that doesn't seem to be the case.

We all have a hard time adapting to new information from time to time.
Keep an open mind and challenge the authorities... but keep in mind that this Peak Oil, resource depletion and the energy crisis have serious intellectual rigor and require a great deal of information to even challenge.

Cheers,

Aaron

msnrochny's picture
msnrochny
Status: Bronze Member (Offline)
Joined: Nov 4 2010
Posts: 49
Re: It's Official: The Economy Is Set To Starve

Wfhyslop (Will) I have had the same question for awhile now.  If deflation, then I should want to hold dollars, if inflation then gold/silver.  Japan did not go crazy in their first decade of deflation trying to stimulate.  They were more conservative in their approach from what I have read.  Once they got more aggressive, they were already too late.  Deflation had taken root.  At least this is some of what I have read of the story.

But for me, you are asking the exact right question.  If Chris is off the mark, and we bet the farm on metals, and deflation is the outcome, we could be in trouble.  It would be great to get Chris's perspective on this one.  I'm sure he has pondered it.

This said, one thing I have noticed is that despite the current deflationary direction, metals keep going up.  This suggests to me that fear is driving some of the growth (not fear of deflation, but just general fear of the unknown).  That, plus the likely devaluation of the Dollar, and the current devaluation of the Euro.  And with countries like China, India and Russia buying gold, demand drives higher prices as well.  So even with deflation, we apparently are getting metal price escalation.

Thoughts?

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1027
Re: It's Official: The Economy Is Set To Starve

Maureen Zika wrote:

I was under the impression the U.S.A. was the Saudi Arabia of natural gas. Why not change vehicles to operate using natural gas? We would then only need 20% of imports.

Some challenges of natural gas are that it is not as energy dense and transportable as gasoline.  What are the time, scale, and cost factors to implement any conceivable alternatives to oil for transportation?  We might have solutions some day, but the transition will be rough at the very least.  There seems to be no viable plan even on the horizon that can be implemented at a rate to offset the predicted declines in oil producionrat. 

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1027
Re: It's Official: The Economy Is Set To Starve

msnrochny wrote:

...But for me, you are asking the exact right question.  If Chris is off the mark, and we bet the farm on metals, and deflation is the outcome, we could be in trouble.  It would be great to get Chris's perspective on this one.  I'm sure he has pondered it.....

My perspective for what it's worth is most folks are still betting the farm on business as usual.  My perspective is no one knows for sure what outcome will happen, but there are many serious possibilities; therefore, I hedge against different possibilities instead of betting on one.

wheatgrassfarmer's picture
wheatgrassfarmer (not verified)
Re: It's Official: The Economy Is Set To Starve

The 3.3 EROI in Table 2 takes no  credit for the residual coke burn which not only provides the fuel for the insitu combustion but produces a lean off gas with enough heat content to generate all the steam and electric power (via a waste heat steam generator and steam turbine/generator) required to operate the entire project....ie, no utility bill. Taking this energy recover into account  results in an  actual EROI of 56. See Euan Mearns/TOD graphic at

http://europe.theoildrum.com/node/5202#comment-483230

comparing different technologies EROI. At 56, THAI results in a crude that is more than economic at $40/bbl. Again, this is no theoretical or bench tested technology....rather 3+ years operating experience at the Conklin Lake/Whitesands pilot in Alberta and 1 year at Kerrobert/Saskatchewan. Granted, there have been startup issues......sand plugging in the producing well and equipment that was resolved with a FacsRite horizontal production liner and challenges getting the oil to the surface in commercial quantites (original plan was to gas lift with the products of combustion)....recent decision was  made to PCPump the wells like every other heavy oil producer and they are working the bugs out of the pump technology for this application (obviously a very gassy crude).

IMHO, this is a global game changing heavy/extraheavy oil production technology that is about to go commercial.The process is c urenntly operating at two sites and about to pilot at the old Shell Dawson Creek site in the large heavy oil/oil sands fairway in the Peace River region of northwest Alberta  as PBG recently bought out Shell's interests and is proceeding with the project.

The oil industry is typically slow adopters of new technology however peak oil will change that where THAI is concerned.

wheatgrassfarmer's picture
wheatgrassfarmer (not verified)
Re: It's Official: The Economy Is Set To Starve

ASPO-USA Peak Oil Notes Thursday, November 25, 2010
Developments this week
The week started calmly with oil trading around $81 a barrel. Then on Wednesday a sudden
surge took place sending oil upwards to close at $83.86. The jump was the biggest since last
July. NY futures have now retraced nearly half of the fall from the two-year high of $88.63
reached on November 11th.  In New York, wholesale gasoline prices jumped 8.6 cents a gallon
and in London Brent crude was trading above $86 Wednesday evening.
The atmospherics surrounding this week’s oil stocks report added more confusion than usual to
markets. While analysts were expecting a 2 million barrel drop in US crude inventories, and the
API was predicting a 5.2 million barrel increase, Wednesday’s EIA report said crude inventories
rose by only 1 million barrels and the total commercial US petroleum inventories actually
decreased by 300,000 barrels.  
While some analysts attributed Wednesday’s rebound to a better than-expected unemployment
report or US stockpiles increasing much less than the API had reported, there are a number of
fundamental forces coming together which suggest that higher prices are coming. China’s diesel
shortage is getting worse and its major oil companies are gearing up to start importing large
quantities of crude. In October, China’s apparent demand for oil increased by 11.8 percent year
over year. In Nigeria, the MEND has resumed blowing up pipelines suggesting that Nigerian
exports may start falling in the near future. Crude in floating storage which was reported as
reaching nearly 140 million barrels at the beginning of the year is expected to be gone in
another 3 or 4 months.
Keeping downward pressure on oil prices is the European debt crisis which is still bubbling
along, despite the Irish bailout. Global onshore inventories are also at record levels, so it may
be some time before these are worked down.
The big Wall Street firms, however, are still talking about $100 oil next year and OPEC officials
are now saying that even $100 oil will not be enough to trigger production increases.  
The diesel situation
Although Beijing’s policy of trying to cut electricity consumption per unit of GDP by 20 percent
seems to be primarily responsible for what seems to shaping up as a global distillate problem,
there are other factors at work. The strikes in France which closed refineries and slowed oil
movements, a surge in Latin American demand, and what the EIA says is a 12 percent increase
in US consumption year over year are also to blame.  
Even the Chinese media are reporting that some 5,000 gas stations have run out of diesel and
the situation is still not over. Beijing does not seem to have increased its imports sufficiently in
the last month so national crude stockpiles must be running down as refinery output increases.
This all suggests that there will be a major surge in Chinese imports, similar to the situation in
2008, in the offing. Wall Street analysts are bending over backwards to avoid suggesting that
economy-killing 2008 prices are in the offing but are telling us that we might be seeing $100 oil
next year and that it won’t really be so bad.
Peak Oil Notes
A Mid-week Update   
 
Tom Whipple, Editor

subscribe at http://zoom.netatlantic.com/read/all_forums/subscribe?name=poreview

guardia's picture
guardia
Status: Platinum Member (Offline)
Joined: Jul 26 2009
Posts: 592
Re: It's Official: The Economy Is Set To Starve

Deflation, inflation, it does not matter for PM like gold and silver, because they are their own monies. Consider that in a serious deflation, the problem basically boils down to the lack of available currency. So say there is somebody that owns a farm, or something, and that also has some gold or silver, but can't get any dollars for it from the bank for xyz reasons, but they want to hire someone anyway. If that someone is you, would you accept gold or silver as payment? That's the kind of thing we have to keep in mind here. It doesn't matter whether the dollar is destroyed via deflation or inflation

We have to stop thinking in terms of dollars, period.

Samuel

phecksel's picture
phecksel
Status: Silver Member (Offline)
Joined: May 24 2010
Posts: 157
Re: It's Official: The Economy Is Set To Starve

Abiotic Oil...

Lot of arguments against it, because oil fields are emptying.  How about thinking that Abiotic Oil is real, but we are using it at a substantially higher rate then it can be replenished?

wfhyslop's picture
wfhyslop
Status: Bronze Member (Offline)
Joined: Sep 3 2008
Posts: 46
Re: It's Official: The Economy Is Set To Starve

msnrochny,

First, I think Dr. Martenson is "on the mark" on most (if not all) things, with the possible exception of his assumption of inflation in the near term - which is the basis for his advice re investing. Whether it will be inflation or deflation in the next few years - neither will be pleasant and people need to prepare to become much more resilient in food, water, energy, community, etc. Everybody needs to have some gold/silver as insurance or hedge (not as an investment) against inflation. As woodman says, you cannot bet the farm on either side - so people should prepare for deflation as well - get out of debt and stay liquid (dollars) to some degree.  Myself, I have managed to get out of most debts (including mortgage), totally out of the markets, a small position in PM, some farmland and woodland,  and anything left over in cash (some US and some CAD).  My concern at this point is how (or whether) to deploy this cash to best prepare my family for the coming storm.

As for your comment that gold/silver is going up while we are expereincing deflation, it is not that unusual since historically there is not a strong correlation between gold and inflation/deflation.  Gold rises most in times of financial crises or uncertainy. I am also a subscriber to Bob Prechters Elliotwave.com site as well to see the deflation view of things.  He beleives that the markets are currently reacting to the excess liquidity flows from the Fed in an "all the same market" way.  That is all markets: stocks, bonds, commodities, gold, etc. are rising and the US dollar if falling.  As the US dollar bottoms and begins to rise (as it is currently doing) this effect will reverse - and ALL markets will fall: stocks, bonds, commodities and gold/silver (which is beginning to happen). IF deflation takes hold expect most financial markets to fall (including gold/silver and oil) and the US dollar to rise substantially.  I am Canadian and am contemplating moving more assets to US dollars to guard against deflation since most debts globally are in US funds and as the deleveraging process continues more US debt will evaporate and make the remaining US dollars worth more.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Oil: Beyond the Barrel - And Over the Cliff

Oil: Beyond the Barrel - And Over the Cliff

by: Bruce Pile November 26, 2010
 
As the price of oil climbs through $85 a barrel, it reminds me of the explanations flying around a little over two years ago as oil went to this level for the first time. "It's all the funds chasing the hot commodity - the only game in town" was the refrain. It's all a bubble and we will have stable oil at $35 soon - that's what Steve Forbes and many others said. But now, as oil goes through $85, it's not the only game in town. In fact, it's been the dog underperforming just about everything. No desperate performance chasing mania is driving the price of oil today as we threaten $100 again. Could those peak oil nuts be right? Could the Great Recession be camouflaging a real supply peaking process?

There is an interesting article out just yesterday over at The Post Carbon Institute by Tom Whipple. He states:

For two weeks now the peak oil portion of cyberspace has been abuzz with commentary on the International Energy Agency's (IEA) newly released World Energy Outlook 2010. Without missing a beat and without much explanation, the world's leading compiler of everything about energy has gone from denying that conventional oil production will peak in our lifetime to saying it happened four years ago.

What? A conventional oil peak happening in late 2005? That's what nuts like Ken Deffeyes and me were saying back then. Overall barrels of what is classified as "oil" isn't peaking. But conventional oil was peaking then, and that's where all the net energy is. As Tom Whipple's article points out, it's net energy that is missing from the equation of energy planners. And, as I wrote in an article about back in April, this miscalculation is a potential nightmare waiting to engulf us. CNBC had just started showing their "Beyond The Barrel" story, and this prompted me to post "Beyond The Barrel - And Over The Cliff" on my blog where I look at this whole conventional vs nonconventional, net energy peak thing. This is the post:

CNBC premiered "Beyond the Barrel - the Race to Fuel the Future". This is a look at the alternatives to the crude oil bursting forth from the ground that has spoiled us for decades with cheap, abundant energy. One thing that will probably be missing in the discussion is the major issue EROEI. What is EROEI? How do you pronounce it? Well, I don't concern myself with pronouncing it, but I do get vexed by how much attention is being paid to it.

EROEI is simply Energy Returned On Energy Invested. It was not even a word back when Jed Clampett could start a bubblin' crude when he was out shootin' for some food. But as we started drilling deeper to recover oil, people like Cleveland and Hall began tabulating estimates on how much of our energy supply was being used to find, drill, and use our new energy finds. They come up with about a 100 figure for oil of the 1930s (1 barrel of oil burned to get 100 new barrels online). This had dropped to around 30 by the 1970s as so much of the easy to find oil in the world's elephant fields in naturally pressurized reservoirs has already been exploited. EROEI for oil and natural gas now is running around 8 - 11 depending on locale.

That is a huge drop from the 100 EROEI of the 1930s, but as it turns out in the math of net energy, it's not that big a deal. What is a big deal is what happens as this EROEI number goes from around 8 to below 4. (click on chart to enlarge)

This chart, constructed by Dr. Euan Mearns, an editor at theoildrum.com, plots net energy as a percent from 100 down to zero over EROEI's range from very high down to one, where it is taking a barrel of recovered energy to obtain a barrel of new energy. As you can see, we're in fine shape as long as EROEI keeps north of 8, but we fall and we can't get up as we go over the cliff as EROEI goes to 4 and below. This is an exponentially increasing problem as we try to replace peaking crude production with things like corn ethanol, which is a worthless solution.

As this oil replacement scale shows, corn ethanol, at an estimated EROEI of 1.3, must be produced at a rate of over 20 barrels for each barrel of oil it replaces energy-wise. Many biodiesel, solar, and electric EROEI estimates aren't much better.

You see a lot of barrel count estimates of future oil production as we deal with peak oil, but as we go over the top of the conventional oil production peak (the evidence suggests we already have) the flood of "alternative" liquids such as tar sand oil, deepwater, etc. are severely challenged to come close to matching crude's EROEI. This makes a big difference in how much net energy is actually being delivered to society despite the raw barrel count. This makes a good EROEI estimate of any new alternative fuel critically important - its most important feature. But nobody is paying any attention as we approach the net energy cliff.

If you were to do an adjusted production curve to get an estimate of a "net energy curve" based on best current estimates on EROEI of the various nonconventional oil liquids going into the barrel count of official oil supply, you get a much different curve than the official projections (which all our energy planning is based on).

The two curves are for the more traditional base production decline rate estimate of 4.5% annually and for the newer estimates suggesting this to be around 7% - so a kind of best and worst case range is shown. The EROEI issue becomes acute as we go past about 2011 unless something radical is done about the low EROEI oil replacement theme that is now so entrenched in Congress, which seems dedicated to any alternative energy in direct inverse relation to its usefulness in actually replacing oil. They dote on corn ethanol because of a powerful corn lobby. They slight lightly lobbied natural gas in favor of the black lung clean coal coalition. They reward anything that will take decades to scale up as an oil replacement and ignore the one viable thing that's already at the scale and the EROEI needed - natural gas.

Obviously, replacing oil is going to have to be a team effort from many things - renewable ethanols, solar, wind, and the best currently available bridge to all these future fuels - natural gas. But we're going to have to pay a lot more attention to the EROEI science of all these team members, or we're not even going to make the playoffs.

Disclosure: Long OIL

http://seekingalpha.com/article/238746-oil-beyond-the-barrel-and-over-the-cliff

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments