It’s Official: The Era of Cheap Oil Is Over
Published on Friday, June 12, 2009 by TomDispatch.com
It’s Official: The Era of Cheap Oil Is Over
Energy Department Changes Tune on Peak Oil
by Michael T. Klare
Every summer, the Energy Information Administration <http://www.eia.
its International Energy Outlook <http://www.eia.
As it happens, the recent release of the 2009 IEO has provided energy watchers with a feast of significant revelations. By far the most
significant disclosure: the IEO predicts a sharp drop in projected future world oil output (compared to previous expectations) and a
corresponding increase in reliance on what are called "unconventional fuels" — oil sands, ultra-deep oil, shale oil, and biofuels.
So here’s the headline for you: For the first time, the well-respected Energy Information Administration appears to be joining with those
experts who have long argued that the era of cheap and plentiful oil is drawing to a close. Almost as notable, when it comes to news, the 2009 report highlights Asia’s insatiable demand for energy and suggests that China is moving ever closer to the point at which it will overtake the United States as the world’s number one energy consumer. Clearly, a new era of cutthroat energy competition is upon us.
Peak Oil Becomes the New Norm
As recently as 2007, the IEO projected that the global production of conventional oil (the stuff that comes gushing out of the ground in
liquid form) would reach 107.2 million barrels per day in 2030, a substantial increase from the 81.5 million barrels produced in 2006.
Now, in 2009, the latest edition of the report has grimly dropped that projected 2030 figure to just 93.1 million barrels per day — in
future-output terms, an eye-popping decline of 14.1 million expected barrels per day.
Even when you add in the 2009 report’s projection of a larger increase than once expected in the output of unconventional fuels, you still end up with a net projected decline of 11.1 million barrels per day in the global supply of liquid fuels (when compared to the IEO’s soaring 2007 projected figures). What does this decline signify — other than growing pessimism by energy experts when it comes to the international supply of petroleum liquids?
Very simply, it indicates that the usually optimistic analysts at the Department of Energy now believe global fuel supplies will simply not be able to keep pace with rising world energy demands. For years now, assorted petroleum geologists and other energy types have been warning <http://www.peak
Until recently, Energy Information Administration officials scoffed at the notion that a peak in global oil output was imminent or that we
should anticipate a contraction in the future availability of petroleum any time soon. "[We] expect conventional oil to peak closer to the
middle than to the beginning of the 21st century," the 2004 IEO report stated emphatically.
Consistent with this view, the EIA reported one year later that global production would reach a staggering 122.2 million barrels per day in 2025, more than 50% above the 2002 level of 80.0 million barrels per day. This was about as close to an explicit rejection of peak oil that you could get from the EIA’s experts.
Where Did All the Oil Go?
Now, let’s turn back to the 2009 edition. In 2025, according to this new report, world liquids output, conventional and unconventional,
reach only a relatively dismal 101.1 million barrels per day. Worse yet, conventional oil output will be just 89.6 million barrels per day. In
EIA terms, this is pure gloom and doom, about as deeply pessimistic when it comes to the world’s future oil output capacity as you’re likely to get.
The agency’s experts claim, however, that this will not prove quite the challenge it might seem, because they have also revised downward their projections of future energy demand. Back in 2005, they were projecting world oil consumption in 2025 at 119.2 million barrels per day, just below anticipated output at that time. This year — and we should all theoretically breathe a deep sigh of relief — the report projects that 2025 figure at only 101.1 million barrels per day, conveniently just what the world is expected to produce at that time. If this actually proves the case, then oil prices will presumably remain within a manageable range.
In fact, however, the consumption part of this equation seems like the less reliable calculation, especially if economic growth continues at anything like its recent pace in China and India. Indeed, all evidence suggests that growth in these countries will resume its pre-crisis pace by the end of 2009 or early 2010. Under those circumstances, global oil demand will eventually outpace supply, driving up prices again and threatening recurring and potentially disastrous economic disorders — possibly on the scale of the present global economic meltdown.
To have the slightest chance of averting such disasters means seeing a sharp rise in unconventional fuel output. Such fuels include Canadian oil sands, Venezuelan extra-heavy oil, deep-offshore oil, Arctic oil, shale oil, liquids derived from coal (coal-to-liquid
But for an expansion on this scale to occur, whole new industries will have to be created to manufacture such fuels at a cost of several
trillion dollars. This undertaking, in turn, is provoking a wide-ranging debate over the environmental consequences of producing such fuels.
For example, any significant increase in biofuels use — assuming such fuels were produced by chemical means rather than, as now, by cooking — could substantially reduce emissions of carbon dioxide and other greenhouse gases, actually slowing the tempo of future climate change.On the other hand, any increase in the production of Canadian oil sands, Venezuelan extra-heavy oil, and Rocky Mountain shale oil will entail energy-intensiv
In addition, increased biofuels production risks <http://www.nyti
the diversion of vast tracts of arable land from the crucial cultivation of basic food staples to the manufacture of transportation fuel. If, as
is likely, oil prices continue to rise, expect it to be ever more attractive for farmers to grow more corn and other crops for eventual
conversion to transportation fuels, which means rises in food costs that could price basics out of the range of the very poor, while stretching working families to the limit. As in May and June of 2008, when food riots spread across the planet in response to high food prices — caused, in part, by the diversion of vast amounts of corn acreage to biofuel production — this could well lead to mass unrest and mass starvation.
A Heavy Energy Footprint on the Planet
The geopolitical implications of this transformation could well be striking. Among other developments, the global clout of Canada,
Venezuela, and Brazil — all key producers of unconventional fuels — is bound to be strengthened.
Canada is becoming increasingly important as the world’s leading producer of oil sands <http://ngm.nati
the ground and treated in various energy-intensiv
according to the most optimistic scenarios, 6.5 million barrels) by 2030.
Given the IEA’s new projections, this would represent an extraordinary addition to global energy supplies just when key sources of conventional oil in places like Mexico and the North Sea are expected to suffer severe declines. The extraction of oil sands, however, could prove a pollution disaster of the first order. For one thing, remarkable infusions of old-style energy are needed to extract this new energy, huge forest tracts would have to be cleared, and vast quantities of water used for the steam necessary to dislodge the buried goo (just as the equivalent of "peak water" may be arriving).
What this means is that the accelerated production of oil sands is sure to be linked to environmental despoliation, pollution, and global
warming. There is considerable doubt that Canadian officials and the general public will, in the end, be willing to pay the economic and
environmental price involved. In other words, whatever the IEA may project now, no one can know whether synfuels will really be available in the necessary quantities 15 or 20 years down the road.
Venezuela has long been an important source <http://tonto.ei
The big winner in these grim energy sweepstakes, however, is likely to be Brazil <http://www.eia.
When the substantial technical challenges to exploiting these undersea fields are overcome, Brazil’s output could soar by as much as three million barrels per day. By 2030, Brazil should be a major player in the world energy equation, having succeeded Venezuela as South America’s leading petroleum producer.
New Powers, New Problems
The IEO report hints at other geopolitical changes occurring in the global energy landscape, especially an expected stunning increase in the share of the global energy supply consumed in Asia and a corresponding decline by the United States, Japan, and other "First World" powers. In 1990, the developing nations of Asia and the Middle East accounted for only 17% of world energy consumption; by 2030, that number, the report suggests, should reach 41%, matching that of the major First World powers.
All recent editions of the report have predicted that China <http://www.eia.
eventually overtake the United States as number one energy consumer. What’s notable is how quickly the 2009 edition expects that to happen. The 2006 report had China assuming the leadership position in a 2026-2030 timeframe; in 2007, it was 2021-2024; in 2008, it was 2016-2020. This year, the EIA is projecting that China will overtake the United States between 2010 and 2014.
It’s easy enough to overlook these shifting estimates, since the reports don’t emphasize how they have changed from year to year. What they suggest, however, is that the United States will face ever fiercer competition from China in the global struggle to secure adequate supplies of energy to meet national needs.
Given what we have learned about the dwindling prospects for adequate future oil supplies, we are sure to face increased geopolitical
competition and strife between the two countries in those few areas that are capable of producing additional quantities of oil (and undoubtedly genuine desperation among many other countries with far less resources and power).
And much else follows: As the world’s leading energy consumer, Beijing will undoubtedly play a far more critical role in setting international energy policies and prices, undercutting the pivotal role long played by Washington. It is not hard to imagine, then, that major oil producers in the Middle East and Africa will see it as in their interest to deepen political and economic ties with China at the expense of the United States. China can also be expected to maintain close ties with oil providers like Iran and Sudan, no matter how this clashes with American foreign policy objectives.
At first glance, the International Energy Outlook for 2009 hardly looks different from previous editions: a tedious compendium of tables and text on global energy trends. Looked at another way, however, it trumpets the headlines of the future — and their news is not comforting.
The global energy equation is changing rapidly, and with it is likely to come great power competition, economic peril, rising starvation, growing unrest <http://www.tomd
© 2009 TomDispatch.com
/Michael T. Klare is the Five College Professor of Peace and World Security Studies at Hampshire College in Amherst, Massachusetts//
//A documentary version of that book is available at bloodandoilmovi
book, Rising Powers, Shrinking Planet: The New Geopolitics of Energy <https://www.ama
was recently published by Metropolitan Books. //To listen to a TomDispatch audio interview in which Klare discusses the future of oil
in 2009 and beyond, click here <http://tomdispa
What Is Going To Happen And Why Weren’t We Forewarned?
By Nicholas C. Arguimbau
April 23, 2010 “
- zero time to plan how to replace cars in our lives
- zero time to plan how to manufacture and install millions of furnaces to replace home oil furnaces, and zero time toproduce the infrastructure necessary to carry out that task
- zero time to retool suburbia so it can function without gasoline
- zero time to plan for replacement of the largest military establishment in history, almost completely dependent upon oil
- zero time to plan to support nine billion peolple without the “green revolution,” a creation of the age of oil
- zero time to plan to replace oil as an essential fuel in electricity production
- zero time to plan for preserving millions of miles of roads without asphalt.
- zero time to plan for the replacement of oil in its essential role in EVERY industry.
- zero time to plan for replacement of oil in its exclusive role of transporting people, agricultural produce, manufactured goods. In a world without oil that appears only twenty years away, there will be no oil-burning ships transporting US grain to other countries, there will be no oil-burning airlines linking the world’s major cities, there will be no oil-burning ships transporting Chinese manufactured goods to the billions now dependent on them.
- zero time to plan for the survival of the billions of new people expected by 2050 in the aftermath of “:peak everything.”
- zero capital, because of failing banks ansd public and private debt, to address these issues.
- The great majority of authorities believe there is little more than 1 trillion barrels of conventional oil left. You can make a simple calculation from that: At the present rate of 30 billion barrels per year, 82 million barrels per day, it will all be gone in 33 years, and consumption has been rapidly increasing, not decreasing, so if anything it will all be gone sooner…
- A closer look at the graph reveals that it was drawn on the assumption that the world’s existing conventional fields contain only 750,000 barrels at this time, enough to keep us going only 25 years.
- The graph assumes a decline rate of 4% per year. As long as the estimates of remaining reserves are right, that can’t be far off. In fact, 4% is a relatively low decline rate compared to what has been observed in oil fields generally. Hold on, it’s going to be a fast ride down!
- The major oil companies, which presumably know better than we do how much oil is in their possession, “conspicuously fail to invest in new refining capacity, which would surely be needed if production were set to rise.'” Campbell, http://www.greatchange.org/ov-campbell,outlook.html . The excess of refining capacity over demand remained close to 10 million bpd during the nineties, but dropped to almost nothing in the last decade as a result of failure to build new capacity. http://www.imf.org/external/pubs/ft/weo/2006/01/chp1pdf/fig1_21.pdf . The United States Joint Forces Command has also reported the failure of the oil industry to invest in the refining capacity necessary to permit expanded production, and that “Even were a concerted effort begun today to repair that shortage, it would be ten years before production could catch up with expected demand.” “Joint Operating Environment 2010,” at 26. http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf
- The most frequiently discussed significant source of unexploited petroleum is the tar sands of Alberta, Canada. Because a high percentage of the energy value of the tar sands has to be expended in their extraction, the reported quantity of reserves is misleading, and two independent researchers have estimated respectively that production from the tar sands by 2020 may be expected of 3.3 million bpd and 4 million bpd. Consequently, the likelihood of the tar sands making a significant contribution to the world’s petroleum demand in the foreseeable future is low.Phil Hart and Chris Skrebowski, “Peak oil: A detailed and transparent analysis,” http://www.energybulletin.net/node/30537
The shortfall, labelled “unidentified projects,” that needs to be filled in 20 years is an unprecedented 60 million barrels per day, equivalent to 3/4 of today’s total production. We have never in history done anything comparable to that. Although there are large deposits of “unconventional” oil such as the Canadian tar sands, most are making only slow progress at development and consume as much or more energy in their production as they can generate. The independent Oxford Institute of Energy Studies has estimated a possibe development of 6.5mbpd of such projects, when we’ll need more than that every two years just to keep our place. So the likelihood of anything at all making a significant dent in the shortfall is small. Indeed, the “unidentified projects” can be perceived as just a “euphemism for rank shortage” (Campbell http://www.greatchange.org/ov-campbell,outlook.html) The United States Joint Forces Command has come to the similar conclusion: that of all potential future energy sources, “None of these provide much reason for optimism,” http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf Petroleum industry investment banker Matt Simmons calls them “faith-based.” http://www.simmonsco-intl.com/files/Northern%20Trust%20Bank.pdf at 4
- The “Hubbert Peak” theory of oil field depreciation, which predicted the peak and subsequent demise of the US oil inudtry 15 years in advance and within 2 years of its occurence http://www.hubbertpeak.com/hubbert/1956/1956.pdf , says that with normal production methods, a country reaches peak production in its oil fields when they are 50% depleted, with the production curve being bell-shaped. The peak can be postponed with innovative extraction techniques, but this only causes subsequent more rapid decline of the deposits and total extraction if anything decreasing. The world reached the midpoint of its reserves in the last decade, so the 2005 “peak” implied by the above graph is very close to what would be expected.
- Astonishingly, Dr. Hubbert in the same 1956 paper predicted, based upon records of only 90 billion barrels of oil having been recovered worldwide, that the peak of world petroleum production would be approximately the year 2000; this apparently quite accurate prediction by Hubbert has largely been forgotten. http://www.hubbertpeak.com/hubbert/1956/1956.pdf . One is tempted to ask why, if one man could predict the timing of the peak 44 years before it occurred, the United States Department of Energy is incapable of recognizing it after it occurred.
- There’s a common feeling that just becase we don’t know where the oil is, doesn’t mean the Mother Lode isn’t right around the corner. But if you’ve looked everywhere, the chances are a lot slimmer. The lag time between discovery and bringing to full production of a field is 30-40 years, which means that even the virtually impossible discovery of another Saudi Arabia would barely change the graph above, of production between now and 2030. But no such discoveries are left to be made. The rate of discovery of new conventional oil has been steadily dropping now for FORTY years despite ever-more searching with ever-more-sophisticated technology. There have been two pivotal events: the peak of discovery around 1968, and the day in 1981` when discovery of new oil deposits no longer kept up with production. There is nothing complicated about this. As Campbell says, the warning sign there for anyone to see
“simply recognized two undeniable facts:
- You have to find oil before you can produce it
- Production has to mirror discovery after a time lag
“Discovery reached a peak in the 1960s – despite all the technology we hear so much about, and a worldwide search for the best prospects. It should surprise no one that the corresponding peak of production is now upon us.” Indeed, Campbell’s second point means that the inevitable peaking of oil production in the early 21st century, should have been clear for all to see since the peaking of discovery in the late sixties.
Campbell does not stand alone. As the US Joint Forces Command observes, “The discovery rate for new oil and gas fields over the last two decades (with the possible exception of Brazil) provides little reason for optimism that future efforts will find major new fields.” “Joint Operating Environment 2010,” at 31.
Saudi Arabia’s largest field, the Ghawar, is now in decline and it appears that the country has nothing to offset that decline. That has led many to conclude that “Peak Oil is a Done Deal.” (Dave Cohen, ASPO/USA Energy Bulletin, July 16, 2008. http://www.energybulletin.net/node/45940 )
At the same time all of this was happening, the UN, the US Congress, the Obama Administration and the oil industry were negotiating over goals for global warming legislation. Miraculously, although arguably coincidentally, the percentage-reduction goals agreed to fit quite precisely the percentage reductions in oil consumption that will be physically forced upon us all if you believe the above graph: an 18% drop from 2005 by 2020, and an 85% drop from 2005 by 2050. (It is possible to extrapolate the graph, which assumes exponentially dropping levels of existing reserves at a 4% per year rate.) This compares to reductions of CO2 emissions 17% from 2005 in 2020 and 80% from 2005 in 2050 in the bill. So it would appear that the legislative goals have been set, for whatever reason, so that the oil industry will have to do little if anything it won’t have to do in any event because of dwindling reserves. http://ecoglobe.ch/energy/e/peak9423.htm . It is hard to see how the negotiators could have come up with such correspondence if they had not all been aware of the impending crash of production and the expected decline rate.. Coincidence? Maybe, but somehow it seems unlikely. Whether or not by intent, the goals fit the needs of the oil companies rather than the needs calculated by the scientists.