It's Official: The Era of Cheap Oil Is Over

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It's Official: The Era of Cheap Oil Is Over

<http://www.commondreams.org/view/2009/06/12>

Published on Friday, June 12, 2009 by TomDispatch.com
<http://www.tomdispatch.com/post/175082/michael_klare_goodbye_to_cheap_oil>

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.doe.gov/> (EIA) of the U.S. Department of Energy issues
its International Energy Outlook <http://www.eia.doe.gov/oiaf/ieo/index.html> (IEO) -- a jam-packed compendium of data and analysis on the evolving world energy equation. For those with the background to interpret its key statistical findings, the release of the IEO can provide a unique opportunity to gauge important shifts in global energy trends, much as reports of routine Communist Party functions in the party journal Pravda once provided America's Kremlin watchers with insights into changes in the Soviet Union's top leadership circle.

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.peakoil.net/> that world oil output is approaching a maximum sustainable daily level -- a peak -- and will subsequently go into decline, possibly producing global economic chaos. Whatever the timing of the arrival of peak oil's actual peak, there is growing agreement that we have, at last, made it into peak-oil territory, if not yet to the moment of irreversible decline.

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, will
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-liquids or CTL), and biofuels. At present, these cumulatively constitute only about 4% of the world's liquid fuel supply but are expected to reach nearly 13% by 2030. All told, according to estimates in the new IEO report, unconventional liquid production will reach an estimated 13.4 million barrels per day in 2030, up from a projected 9.7 million barrels in the 2008 edition.

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-intensive activities at staggering levels, sure to emit vast amounts of CO2, which might more than cancel out any gains from the biofuels.

In addition, increased biofuels production risks <http://www.nytimes.com/2008/05/30/business/worldbusiness/30food.html>
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.nationalgeographic.com/2009/03/canadian-oil-sands/kunzig-text.html>, or bitumen -- a thick, gooey, viscous material that must be dug out of
the ground and treated in various energy-intensive ways before it can be converted into synthetic petroleum fuel (synfuel). According to the IEO report, oil sands production, now at 1.3 million barrels a day and barely profitable, could hit the 4.4 million barrel mark (or even,
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.eia.doe.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_m.htm> of crude oil for the United States, generating much of the revenue used by President Hugo Chávez to sustain his social experiments at home and an ambitious anti-American political agenda abroad. In the coming years, however, its production of conventional petroleum is expected to fall, leaving the country increasingly reliant <http://www.eia.doe.gov/emeu/cabs/Venezuela/Background.html> on the exploitation of large deposits of bitumen in the eastern Orinoco River basin. Just to develop these "extra-heavy oil" deposits will require significant financial and energy investments and, as with Canadian oil sands, the environmental impact could be devastating. Nevertheless, successful development of these deposits could prove an economic bonanza
for Venezuela.

The big winner in these grim energy sweepstakes, however, is likely to be Brazil <http://www.eia.doe.gov/emeu/cabs/Brazil/Background.html>. Already a major producer of ethanol, it is expected to see a huge increase in unconventional oil output once its new ultra-deep fields in the "subsalt" Campos and Santos basins come on-line. These are massive offshore oil deposits buried beneath thick layers of salt some 100 miles off the coast of Rio de Janeiro and several miles beneath the ocean's surface.

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.doe.gov/emeu/cabs/China/Background.html> would
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.tomdispatch.com/post/175038>, environmental disaster, and shrinking energy supplies, no matter what steps are taken. No doubt the 2010 edition of the report and those that follow will reveal far more, but the new trends in energy on the planet are already increasingly evident -- and unsettling.

© 2009 TomDispatch.com
/Michael T. Klare is the Five College Professor of Peace and World Security Studies at Hampshire College in Amherst, Massachusetts//, and the author of Blood and Oil: The Dangers and Consequences of America's Growing Dependence on Imported Petroleum <http://www.amazon.com/dp/0805073132?tag=commondreams-20&camp=0&creative=0&linkC\
ode=as1&creativeASIN=0805073132&adid=08BMDYW82ZNCF5NFGT4C&
>.
//A documentary version of that book is available at bloodandoilmovie.com <http://www.bloodandoilmovie.com/>. //His newest
book, Rising Powers, Shrinking Planet: The New Geopolitics of Energy <https://www.amazon.com/dp/0805080643?tag=commondreams-20&camp=0&creative=0&link\
Code=as1&creativeASIN=0805080643&adid=1FY2FRHN7E5703KDQKME&
>,
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://tomdispatch.blogspot.com/>.
/

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Re: It's Official: The Era of Cheap Oil Is Over
The Imminent Crash Of The Oil Supply

What Is Going To Happen And Why Weren't We Forewarned?

By Nicholas C. Arguimbau

April 23, 2010 "

Information Clearing House" --  Look at this graph and be afraid.  It does not come from Earth First.  It does not come from the Sierra Club.  It was not drawn by Socialists or Nazis or Osama Bin Laden or anyone from Goldman-Sachs. If you are a Republican Tea-Partier, rest assured it does not come from a progressive Democrat.  And vice versa. It was drawn by the United States Department of Energy, and the United States military's Joint Forces Command concurs with the overall picture.
 
        What does it imply? The supply of the world's most essential energy source is going off a cliff.  Not in the distant future, but in a year and a half.  Production of all liquid fuels, including oil, will drop within 20 years to half what it is today.  And the difference needs to be made up with "unidentified projects," which one of the world's leading petroleum geologists says is just a "euphemism for rank shortage," and the world's foremost oil industry banker says is "faith based."

 
 
This graph was prepared for a DOE meeting in spring, 2009. Take a good look at what it says, assuming it to be correct:

 
    1`. Conventional oil will be almost all gone in 20 years, and there is nothing known to replace it.

 
    2.. Production of petroleum from existing conventional sources has been dropping at a rate slightly over 4% per year for at least a year and will continue to do so for the indefinite future. 

 
    3. The graph implies that we are past the peak of production and that there are750 billion barrels of conventional oil left (the areas under the "conventional" portion of the graph, extrapolated to the right as an exponent ional).  Assuming that the remaining reserves  were 900 billion or more at the halfway point, then we are at least 150 billion barrels, or 5 years, past the midpoint.

 
    4. Total petroleum production from all presently known sources, conventional and unconventional, will remain "flat" at approximately 83 mbpd for the next two years and then will proceed to drop for the foreseeable future, at first slowly but by 4% per year after 2015.

 
    5. Demand will begin to outstrip supply in 2012, and will already be 10 million barrels per day above supply in only five years.  The United States Joint Forces Command concurs with these specific findings. http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf , at 31.  10 million bpd is equivalent to half the United States' entire consumption. To make up the difference, the world would have to find another Saudi Arabia and get it into full production in five years, an impossibility. See The Oil Drum, http://www.theoildrum.com/node/5154

 
    5. The   production from presently existing conventional sources will plummet from its present 81 mbpd to 30 mbpd by 2030, a 63% drop in a 20-year period.

 
    6. Meeting demand requires discovering, developing, and bringing to full production 60mbpd (105-45) of "unidentified projects" in the 18-year period of 2012-2030 and approximately 25 mbpd of such projects by 2020, on the basis of a very conservative estimate of only 1% annual growth in demand.  The independent Oxford Institute of Energy Studies has estimated a possible development of 6.5mbpd of such projects, including the Canadian tar sands, implying a deficit of 18-19 mbpd as compared to demand, and an approximate 14 mbpd drop in total liquid fuels production relative to 2012, a 16% drop in 8 years.

 
    7. The curve is virtually identical to one produced by geologists Colin Campbell and Jean Laherrere and published in "The End of Cheap Oil," in Scientific American, March, 1998, twelve years ago.  They projected that production of petroleum from conventional sources would drop from 74 mbpd in 2003 (as compared to 84 mbpd in 2008 in the DOE graph) and drop to 39 mbpd by 2030 (as compared to 39 mbpd by 2030 in the DOE graph!).http://www.jala.com/energy1.php . Campbell and Laherrere predicted a 2003 "peak," and the above graph implies a 'peak" (not necessarily the actual peak, but the midpointr of production of 2005 or before.

 
    So here we are, if the graph is right, on the edge of a precipice, with no prior warning from either the industry, which knows what it possesses, or the collective governments, which ostensibly protect the public interest.  As Colin Campbell, a research geologist who has worked for many large oil companies and studied oil depletion extensively (http://www.peakoil.net/about-aspo/dr-colin-campbell) says, "The warning signals have been flying for a long time. They have been plain to see, but the world turned a blind eye, and failed to read the message." http://www.greatchange.org/ov-campbell,outlook.html    The world was completely transformed by oil for the duration of the twentieth century, but if the graph is right, within 20 years it will be virtually gone but our dependence upon it will not.  Instead, we have       
  • 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.
        Why zero time? 

 
        Because if we at any time use more oil than allowed by the graph, we will have even less later..

 
        Because we are already committed to supporting 2.5 billion more people on what we have.

 
        Because every day we continue upward in our oil consmption, even though we continue to have more people who need it and billions who deserve to rise from abject poverty, we are making the future supply shortage worse.

 
        If you believe the graph, demand will outstrip supply starting at the end of 2011, and severely outstrip supply in five years.  What are we going to do, and how are we going to do it?  We have no time to decide.       
 IS THE GRAPH RIGHT?

 
        It is very unlikely that things can be better than the graph indicates.  Why?       
  • 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 )

 

IF IT'S A "DONE DEAL," WHY DID IT TAKE UNTIL THE LAST MINUTE TO GET HERE?

 
        "We can wish it, we can dream it, but it will never be, oil is not renewable, and therefore in time it must be realized that THERE WILL BE NO OIL."  ENO Petroleum Corporation, "Peak Oil - The Global Oil Crisis," http://www.enopetroleum.com/opecoilreservers.html.  It is hard to conceive of an act or omission causing more pain to more people and creatures than the failure of "those in charge" to announce with reasonable forewarning that the oil supply was going to crash.  But it is upon us with no forewarning to the general public at all.

 
        The government planning agencies charged with helping the public survive the end of oil could not have performed worse than by recognizing peak oil only after it has happened.  Like anthropogenic global warming ("AGW"), "peak oil" has been the subject of decades of denial.  Notwithstanding Hubbert's famous coup in pinpointing the peak of US oil production through the simple observation that production naturally peaks when the supply is half gone, few would listen that because the worldwide supply of conventional oil would reach the halfway point in the first decade of this century, trouble was right around the corner.  The fact is, coming to that point meant we were in trouble regardless, because the early stages of development of an oil field (like the early stages of growth of virtually anything else) follow  an exponential growth curve, and the world's growth addicts love exponential curves, but once you get beyond the halfway point, it is a mathematical certainty that the longer you attempt to conform the field to a pattern of exponential growth, the more the end is going to be precipitous.  If you don't decelerate rapidly, that is precisely what has to happen - the decline after the halfway point can only be more rapid than the rise beforehand.

 
        What Hubbert observed with respect to the US oil reserves has an intuitive sense to it - as the amount of oil in the field drops, its pressure drops, so the flow begins to slow down - the gusher goes down to a trickle.  But if the owner of the field doesn't make full disclosure of what's there, outsiders can only make educated guesses from general geological principles and what the owner is selling, as to what the future holds.  And as we all know, full disclosure is not the name of the game in the oil business.

 
        If the field is just allowed to release its liquid gold at its natural rate, that's not too bad, because observations like the Hubbert Peak can be applied.  But as technology improves and well pressure can be jacked up to compensate for declining reserves, (for instance by pumping water into the wells) the outside observer loses certainty.. There remains information about the company's reserves, but the accuracy of that information is seriously open to question.  Within OPEC, which allows its members to market in accordance with the amount of their reserves. Hart, "Introduction to Peak Oil," www.philhart.com/content/introduction-peak-oil , there are great temptations to fudge.  Outside observers can follow a country's reports on its reserves, but those reports are highly suspect.  They will remain constant for years while the country is pumping great amounts of oil without reporting any new discoveries, and indeed they can take sudden leaps upward also without reports of new discoveries.  Such "records" lead to the inevitable conclusion that many OPEC reserves reports are fictional.  If you would like to see charts of OPEC oil reserves mysteriously contorting themselves, you are invited to take a look at Hart's essay.  So if you thought the experts had it all in hand and would reliably warn us when trouble was a'brewin', think again.  Not only do OPEC members have internal business reasons to exaggerate their reserves, but companies on the public stock market want to satisfy their stockholders of their long-term viability, and all oil producers want to make their customers confident that they can rely on oil for the long haul.  By concealing their future from homeowners, oil companies have made trillions for the real estate business and the banks at the expense of those who chose urban sprawl over dense "near-in" housing, and the companies themselves will make trillions in the near future selling to consumers trapped into oil addiction, who might have sought alternatives more vigorously had they known how close the crash was.

 
        Matt Simmons, the banker who has spent his post-Harvard-Business School career advising oil companies and saving as peak oil advisor to the last Presidential administration and specifically to President Bush, ought to know.  And what he says is that Western oil companies like ExxonMobil would be strongly opposed to the idea of transparent data because it would reveal “how crappy and old their fields really are.” Energy TechStocks.com, "Meeting the Challenge Matt Simmons: Force All Oil Producers to Give Transparent Data,"  According to EnergyStocks.com, Simmons has warned that "the failure of Saudi Arabia and other major oil producers to provide transparent production data has left the world in a lurch, unable to know whether it can maintain an adequate supply of oil in the face of burgeoning demand Such uncertainty has led to indecision about whether the world should invest the huge sums of money necessary to develop alternative transportation fuel sources."

 
        Just how bad the published reserve figures for the major oil-producing nations are, has long been understood.  We like to say that what goes up, must come down, but not OPEC member-nation oil reserves.  Their allowed production quotas depend upon their reserves, so there is a built-in temptation to overstate reserves and never reflect in reduiced reserve figures, what they have pumped out.  In 1988, the OPEC oil reserves "magically and miraculously increased twofold," without any corresponding discovery of new fields.  The officially reported reserves follow graphs that would be comical were it not for the fact that 6.8 billion people, and counting, depend upon the real numbers.  See http://www.enopetroleum.com/opecoilreservers.html

 
        Now we are facing the consequences of the major oil producers "leaving the world in a lurch": almost complete inability to cope with the severe difficulties we face in transporting, feeding, housing, and keeping warm the burgeoning billions of our numbers.  It is hard to conceive of how any private entity could impose so much pain on so many.  It didn't need to be that way. The US Government and its cohorts around the world could have imposed transparency on the oil companies as to their true reserves, and we would have had fair warning and the possibiity of coping.  Yes, and the moon could be made of green cheese.

 
        Of course, as noted, it is possible to produce a graph roughly like the one above with nothing more than production data and reserves data. The former are public, and the latter are known to a limited extent.  It has been the consensus of decisionmakers for many years that the world had a total (both produced and still in the ground) of approximately 2 trillion barrels of conventional oil, and as pointed out by Campbell, four decades of dwindling discoveries have left us with an absolute inability to increase available reserves in a timely manner to mitigate the looming shortfall.  The two trillion barrel figure was absolutely critical for doing what planning could be done, but at the beginning of the last decade, the US broke ranks with the consensus of the rest of the world, declared through the historically-reliable US Geological Survey (USGS) that world reserves of conventional oil (both consumed and yet-to-be-consumed) were in fact in the neighborhood of three trillion barrels rather than two, a claim which if true immediately provided the world by sleight of hand  with an extra thirty years' supply at present consumption rates.  To be sure, USGS former employees disputed its estimates as relying "heavily on guesses to calculate new oil discoveries," and on doubling the usual 30 percent recovery rate from reserves "with no technology in mind capable of doing that." Gordon, "Worries Swelling Over Oil Shortage," Energy Bulletin March 20-, 2005.  The concerns about overestimation of discoveries proved correct: they continued on their downward track.  This alone created a discrepancy between the USGS projections and reality of approximately 900 billion barrels. At the same time, the production data appeared to peak in 2005, prominent Princeton University petroleum geologist Kenneth Deffeyes predicted that 2005 was the year, and Simmons suggested similar concerns. http://www.energybulletin.net/node/4835  and http://www.simmonsco-intl.com/files/Northern%20Trust%20Bank.pdf  (p. 31).   Nonetheless, based upon the USGS wishful thinking, during the Bush Administration, the Department of Energy was forecasting a "production peak somewhere between 2021 and the start of the next century, with 2037 the most likely date."  http://www.energybulletin.net/node/4835  Not to worry.

 
        With the peak imminent in reality, like the global warming "scientific skeptics," industry in 2006 came up with a "theory" published in a non-peer-reviewed report, that "peak oil" was in its totality a false concept, and that the true behavior of an oil field or conglomeration thereof was a peak followed by an "undulating plateau" and then a gentle decline by around 2% per year, years, perhaps decades later.  According to Cambridge Energy Research Associates (CERA), "“It is likely that the situation will unfold in slow motion and that there are a number of decades to prepare for the start of the undulating plateau.  This means that there is time to consider the best way to develop viable energy alternatives that would eventually provide the bulk of our transport energy needs."  www.cera.com/aspx/cda/public1/about/about.aspx  Not to worry.

 
        CERA faulted the "peak oil" proponents with failure to take into acount the facts that reserve estimates evolve with time and that so does the technology used in extracting oil.  The criticism is  disingenuous given that the industry refuses to disclose either the technology it is using at any one time or its true reserves, and the reserve estimates evolve with time more for political reasons than geological one..  The facts the proponents of "peak oil" fail to take into account are facts that the industry will not disclose.  As Simmons has pointed out, "With solid global field-by-field production data, 'Peak Oil timing could be 'proved'."  And, or course, if the "undulating plateau" theory is correct, all the industry has to do is to disclose their true facts to prove it, but  they won't.  Regardless, average decline rates of an oil supply are dictated by only two numbers: how fast we are now using the oil, and how much is left.  Lower decline rates now mean higher decline rates later.  Those are immutable facts even if the "undulating plateau" is correct.  So to avoid a rapid decline in available oil, we must discover and bring to production staggeringly large new supplies, right now today.  Nonetheless, the CERA "theory"  has sufficiently intimidated the bureaucrats that DOE's official position at the moment, as expressed to Le Monde, notwithstanding the graph, is that we are "entering a plateau." petrole.blog.lemonde.fr:80/2010/03/25/washington-considers-a-decline-of-world-oil-production-as-of-2011/

 
       

 
        In short, with all the evidence available, it is hard to see how the industry and the Department of Energy could have failed to see this coming.  Their failure to warn the public, given the consequences, verges on the criminal.  And if somehow they can claim innocence, then we still have to ask why they did not heed the warning of Matt Simmons, advisor on peak oil to the Bush administration, as to the importance of transparency.  But they did not, and here we are.

 
CONCLUSIONS

 
        We are on our own.  We are rapidly going to have to deal with less and less oil, since there has been no forewarning and no planning.  It is a time for communities to prepare for community energy independence, because only that way will be safe.  This means relying on the sun and wind and water that have always been with us.  It means cooperation with each other to get through seriously difficult times.  It means finding alternatives to oil throughout our lives as quickly as possible - the oil that runs our cars, the oil that heats our houses, the oil that runs generators for our electricity, the oil from which chemical fertilizers and insecticides and plastics and polyester are made, the oil that brings countless manufactured goods to us from overseas, the oil on which farmers depend for irrigation pumps, for transporting produce to market, for working the soil to bring us food.  If you believe the graph, it will almost all be gone in 20 years. And the progressives and Tea-Partyers must remember that the people who brought this calamity to us are not our friends but are people we trusted and they trusted, so we must work together to cope with the mess that is upon us, and  "to throw the rascals out.".

 
        The author, Nicholas C. Arguimbau, is an appellate and environmental lawyer licensed in California and residing in Western Massachusetts.  He may be contacted at [email protected] .
 

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.

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