TIME MAGAZINE ON PEAK OIL
After Subject Hits Front Page Of Wall St Journal
22 November 2007
This week 'Peak Oil' made the front page of the Wall St Journal. Now TIME has done a similar piece (see below).
This subject is coming out into the open.
"A growing number of oil-industry chieftains
are endorsing an idea long deemed fringe: The world is approaching a practical limit to
the number of barrels of crude oil that can be pumped every day. Some predict that,
despite the world's fast-growing thirst for oil, producers could hit that ceiling as soon as 2012. This rough limit -- which two senior industry
officials recently pegged at about 100 million barrels a day -- is well short of global
demand projections over the next few decades. Current production is about 85 million
barrels a day.... The new adherents -- who range from senior Western oil-company
executives to current and former officials of the major world exporting countries -- don't
believe the global oil tank is at the half-empty point. But they share the belief that a global production ceiling
is coming for other reasons:
restricted access to oil fields, spiraling costs and increasingly complex oil-field
geology. This will create a global production plateau, not a peak, they contend, with oil
output remaining relatively constant rather than rising or falling. The emergence of a
production ceiling would mark a monumental shift in the energy world. Oil production has
averaged a 2.3% annual growth rate since 1965, according to statistics compiled by British
oil giant BP PLC. This expanding pool of oil, most of it priced cheaply by today's
standards, fueled the post-World War II global economic expansion.... Most of the world's biggest fields are aging, and
production at them is declining rapidly. So, just to keep global production at current
levels, the industry needs to add new production of at least four million daily barrels,
every year. That need is roughly five times the daily production of Alaska, with its big
Prudhoe Bay field -- and it doesn't assume any demand growth at all....Soaring energy
prices have breathed new life into projects targeting 'nonconventional' oil, such as that
trapped in sand or shale. But these sources can't be tapped nearly as quickly or
inexpensively as the big oil finds of the past....As these uncertainties mount, there is
growing hope that Saudi Arabia, which has about 20% of the world's oil reserves, would
ride to the rescue if needed. Saudi Aramco, the national oil company, has embarked on an
ambitious plan to increase its daily production by 30%, or three million barrels, early
next decade, and thus reclaim the title of top producer from Russia. But Mr. Al Husseini,
the former Saudi oil executive, now an independent consultant, said others aren't doing as
much, leaving the world entirely dependent on Saudi Arabia to provide extra capacity.
'Everyone thinks that Saudi Arabia will pull us out of this mess. Saudi Arabia is doing
all it can,' he says in an interview. 'But what it is doing, in the long run, won't be
Oil Officials See Limit Looming on Production
Wall St Journal, 19 November 2007
OPEC's members are not able to boost production in coming years, though, it will be
impossible to keep blaming the traders as prices rise. What happens then? 'If we had
better data, we could hold a global summit
and say, 'Gentlemen, it's nobody's fault, but we've peaked,' says Simmons. 'We've got to
embrace some conservation practices that are draconian, or
we will be at war with each other.' Among the peakists, war and economic
breakdown are favorite themes. They figure that cheap oil is the essential fuel of modern
capitalism, which will founder without it. A more hopeful take is that innovation is the
essential fuel of modern capitalism and that high oil prices will drive rapid advances in
conservation and alternative energy. Either way, the beginning of the end of the oil era
may be upon us....."
TIME, 21 November 2007
JUSTIN FOX By
In July 2006, the world's oil rigs pumped out crude at a rate of nearly 85.5 million bbl. a day. They haven't come close since, even as prices have risen from $75 to $98 per bbl. Which raises a question of potentially epochal significance: Is it all downhill from here?
It's not as if nobody predicted this. The true believers in what's called peak oil--a motley crew of survivalists, despisers of capitalism, a few billionaire investors and a lot of perfectly respectable geologists--have long cited the middle to end of this decade as a likely turning point.
In the oil industry and the government agencies that work with it, such talk is usually dismissed as premature. There have been temporary drops in oil production before, after all--albeit usually during global economic slowdowns, not boom times. In most official scenarios, production will soon begin rising again, peaking at more than 110 million bbl. a day around 2030.
That's alarming enough in itself. Even the optimists think we have less than three decades to go? But at industry conferences this fall, the word from producers was far gloomier. The chief executives of ConocoPhillips and French oil giant Total both declared that they can't see oil production ever topping 100 million bbl. a day. The head of the oil importers' club that is the International Energy Agency warned that "new capacity additions will not keep up with declines at current fields and the projected increase in demand."
This isn't quite the same as saying that oil production has peaked and is about to start declining sharply--the view of the true peakists. In "peak lite," as some call it, the big issues are not so much geological as political, technical, financial and even human-resource-related (the world apparently suffers from a dearth of qualified petroleum engineers). These factors all delay the arrival of oil on the market, meaning that production would not so much peak as plateau. But with demand rising sharply, especially from China and India, even a plateau could be precarious.
It's not that the world is running out of oil. There are massive reserves available in Canadian tar sands, Colorado shale, Venezuelan heavy oil and other unconventional deposits. The problem is that most of this oil is hard to extract and even harder to refine, and it isn't likely to account for a significant share of global production anytime soon. Almost everybody agrees that the pumping of conventionally sourced oil outside the Organization of Petroleum Exporting Countries (OPEC) has already peaked or will peak soon, a reality that even discoveries like the recent 8 billion-bbl. find off the coast of Brazil can't alter because production from so many existing fields is declining.
The big question mark is OPEC, which represents the oil powers of the Middle East and a few other big exporters and currently accounts for 41% of world oil production. Every optimistic scenario assumes that this share will rise dramatically in the coming decades. That is, if things turn out well, the U.S. will become substantially more dependent on Saudi Arabia and its neighbors. Great!
Then there's the gloomy view. In his 2005 book Twilight in the Desert, energy-industry investment banker Matt Simmons opened up a still raging debate over whether Saudi Arabia, OPEC's top producer, really can pump much more oil than it does now. Since the book appeared, Saudi output has dropped from 9.6 million bbl. a day to 8.6 million, despite rising prices.
Saudi officials used the occasion of an OPEC summit in Riyadh in mid-November to say they could up production at any time. But that raises the pesky question of why they don't. So far, the answer from OPEC leaders has been that high prices are the fault of speculators and the falling dollar, not low production. They're not just blowing smoke. Lynn Westfall, chief economist of refiner Tesoro Corp., says there's more than enough oil for sale right now. The price pressure, he explains, "is coming from financial participants in futures markets."
If OPEC's members are not able to boost production in coming years, though, it will be impossible to keep blaming the traders as prices rise. What happens then? "If we had better data, we could hold a global summit and say, 'Gentlemen, it's nobody's fault, but we've peaked,'" says Simmons. "We've got to embrace some conservation practices that are draconian, or we will be at war with each other."
Among the peakists, war and economic breakdown are favorite themes. They figure that cheap oil is the essential fuel of modern capitalism, which will founder without it. A more hopeful take is that innovation is the essential fuel of modern capitalism and that high oil prices will drive rapid advances in conservation and alternative energy. Either way, the beginning of the end of the oil era may be upon us, well ahead of schedule.
PEAK OIL AND LOOMING ENERGY CRISIS
WERE NO SECRET IN THE CORRIDORS OF POWER
"Optimists about world oil reserves, such as
the Department of Energy, are getting increasingly lonely. The International Energy Agency
now says that world production outside the Middle Eastern Organization of Petroleum
Exporting Countries (opec) will peak in 1999 and world production overall will peak between 2010 and
2020. This projection is
supported by influential recent articles in Science and Scientific American. Some
knowledgeable academic and industry voices put the date that world production will peak
even soonerwithin the next five or six years. The optimists who project large
reserve quantities of over one trillion barrels tend to base their numbers on one of three
things: inclusion of heavy oil and tar sands, the exploitation of which will entail huge
economic and environmental costs; puffery by opec nations lobbying for higher production
quotas within the cartel; or assumptions about new drilling technologies that may
accelerate production but are unlikely to expand reserves. Once production peaks, even
though exhaustion of world reserves will still be many years away, prices will begin to
rise sharply. This trend will be exacerbated by increased demand in the developing
world..... The recent report by the President's Committee of
Advisers on Science and Technology... concluded 'A plausible argument can be made
that the security of the United States is at least as likely to be imperiled in the first
half of the next century by the consequences of inadequacies in the energy options
available to the world as by inadequacies in the capabilities of U.S. weapons systems.
It is striking that the Federal government spends about 20 times more R&D money
on the latter problem than on the former.'... The nearly $70 billion spent
annually for imported oil represents about 40 percent of the current U.S. trade
deficit.... Research is essential to produce the innovations and technical improvements
that will lower the production costs of ethanol and other renewable fuels and let them
compete directly with gasoline. At present, the United States is not funding a vigorous
program in renewable technologies.... The United States cannot afford to wait for the next
energy crisis to marshal its intellectual and industrial resources....Our growing
dependence on increasingly scarce Middle Eastern oil is a fool's gamethere is no way
for the rest of the world to win. Our losses may come suddenly through war, steadily
through price increases, agonizingly through developing-nation poverty, relentlessly
through climate changeor through all of the above."
Richard G. Lugar and R. James Woolsey (Former Director of the CIA)
The New Petroleum - Foreign Affairs January/February 1999
"For the world as a whole, oil companies are
expected to keep finding and developing enough oil to offset our seventy one million plus
barrel a day of oil depletion, but also to meet new demand. By some estimates there will
be an average of two per cent annual growth in global oil demand over the years ahead
along with conservatively a
three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an
additional fifty million barrels a day. So where is the oil going to come from? Governments and the national oil companies are
obviously in control of about ninety per cent of the assets. Oil remains fundamentally a
government business. While many regions of the world offer great oil opportunities, 'the Middle East with two thirds of the world's oil and
lowest cost is still where the prize ultimately lies', even though companies are anxious for greater
access there, progress continues to be slow."
Dick Cheney, Chief Executive of Halliburton, now Vice President of the United States
Speech at London Institute of Petroleum, Autumn Lunch 1999
a world of looming shortage, Iraq represented a unique opportunity. With 115bn barrels, it
had the world's third biggest reserves, and after years of war and sanctions they were the
most underexploited. In the late 1990s, production averaged about 2m barrels, but with the
necessary investment its reserves could support three times that. .... Cheney knew, fretting about global oil depletion
in a speech in London the following year, where he noted that 'the
Middle East with two thirds of the world's oil and lowest cost is still where the prize
Blair too had reason to be anxious: British North Sea output had peaked in 1999, while the
petrol protests of 2000 had made the importance of maintaining the fuel supply
excruciatingly obvious. Britain's and the US's fears were secretly formalised during the
planning for Iraq. It is widely accepted that Blair's commitment to support the attack
dates back to his summit with Bush in Texas in April 2002.
What is less well known is that at
the same summit, Blair proposed and Bush agreed to set up the US-UK Energy Dialogue, a
permanent liaison dedicated to 'energy security and diversity'. Its existence was only later exposed through
a freedom of information inquiry. Both governments refuse to release minutes of Dialogue
meetings, but one paper dated February 2003 notes that to meet projected demand, oil
production in the Middle East would have to double by 2030 to more than 50m barrels a day.
So on the eve of the invasion, UK and US officials were discussing how to raise production
from the region - and we are invited to believe this is coincidence."
The real casus belli: peak oil
Guardian, 26 June 2007
AFTER THE INVASION OF
British Prime Minister, House of Commons, 14 April 2003
BEFORE THE INVASION OF
".... our energy system faces new challenges.... Our energy supplies will increasingly depend on imported gas and oil..... we need access to a wide range of energy sources."
British Prime Minister, Foreword to DTI Energy White Paper, February 2003
"International oil markets have become so tight that even small acts of sabotage could result in further large price rises, Alan Greenspan, the former chairman of the US Federal Reserve, said yesterday. 'The balance of world oil supply and demand has become so precarious that even small acts of sabotage or local insurrection have a significant impact on oil prices,' he said.Mr Greenspan painted a bleak picture of the world's rising vulnerability to high crude oil prices, saying he was sceptical that oil producers could pump enough crude to meet future demand.... Mr Greenspan, who now runs a private consultancy, said there were few good short-term policy options for bringing down energy prices, saying it was 'not a choice between good and bad' but 'between not so good and worse'".
I am saddened that it
is politically inconvenient to acknowledge
"Years before George W. Bush entered the White House, and years before the Sept. 11 attacks set the direction of his presidency,a group of influential neo-conservatives hatched a plan to get Saddam Hussein out of power... The group was never secret about its aims. In its 1998 open letter to Clinton, the group openly advocated unilateral U.S. action against Iraq.... Of the 18 people who signed the letter, 10 are now in the Bush administration. As well as Rumsfeld and Wolfowitz, they include Deputy Secretary of State Richard Armitage ... "
"We are writing you because we are convinced that current American policy toward Iraq is not succeeding..... It hardly needs to be added that if Saddam does acquire the capability to deliver weapons of mass destruction, as he is almost certain to do if we continue along the present course, the safety of American troops in the region, of our friends and allies like Israel and the moderate Arab states,and a significant portion of the worlds supply of oil will all be put at hazard."
"The key holdout is Saudi Arabia --
and it is indeed aggravating that even though we went
to war in 1991 principally to protect its oil, they
are unwilling to let us launch air strikes [on Iraq] from their country."
James Woolsey - The Former CIA Director Speaks on Iraq
TIME, 18 February 1998
"Energy is vital to a country's
security and material well-being. A state unable to provide its people with adequate
energy supplies or desiring added leverage over other people often resorts to force.
Consider Saddam Hussein's 1990 invasion of Kuwait, driven by his desire to control more of the world's oil reserves, and the international response to this threat. The underlying goal of the U.N. force, which included 500,000
American troops, was to ensure continued and unfettered access to petroleum...."
Richard G. Lugar and R. James Woolsey (Former Director of the CIA)
The New Petroleum - Foreign Affairs January/February 1999
"If OPEC's members
are not able to boost production in coming years, though, it will be impossible to keep
blaming the traders as prices rise. What happens then? 'If we had better data, we could hold a global summit and say, 'Gentlemen, it's nobody's fault, but
we've peaked,' says Simmons. 'We've got to embrace some conservation practices that are
draconian, or we will be at war with each other.'"
TIME, 21 November 2007
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