WASHINGTON, Oct 1 (Reuters) – Worried soaring oil prices could hurt the best global prospects in years, finance chiefs from wealthy nations met on Friday to try to work out what lay behind the surge and how to buffer the economic expansion.

Group of Seven finance ministers and central bankers met at the tightly guarded U.S. Treasury building over lunch and were to work through the afternoon before a dinner with Chinese counterparts that has currency reform on the menu.

The officials will set out their world-view at about 5:45 p.m. EDT (2145 GMT) in a communiqué sources said would include a call to bolster oil-market monitoring to make it easier to discern if scarce supply, hefty demand or market speculation lay behind crude’s drive to record levels.

The answer to this question is critical.

It could affect policy responses big oil consumers must adopt — higher interest rates to stem inflation or a renewed focus on finding new energy sources — and may offer key information on how long the price rise will last.

On Friday, U.S. crude oil futures topped $50 a barrel.


“High and volatile oil prices pose a risk to the outlook, dampening consumer spending and company profitability,” Britain’s Chancellor of the Exchequer, Gordon Brown, warned on Friday. He said it was vital for the G7 “to improve the transparency and the efficiency of the oil market.”

G7 sources said a document released on Friday by Brown laying out his calls for improved energy market data would form the basis of language on oil in the ministers’ communiqué.

After the half-day formal meeting, G7 ministers will sit down with China for a working dinner billed as an historic chance to bring the Asian giant into the fold and discuss its plans to ease a peg of its yuan… to the dollar…

The G7 gathering comes ahead of weekend meetings of the International Monetary Fund and World Bank…

Ministers are seeking energy market transparency to discover if world oil supplies may be scantier than they thought in May when they urged producers to open the spigots…

Another G7 official suggested the rise in oil costs was rooted in such fundamental factors as over-estimated supplies and was not solely due to speculation.

There is “a recognition that oil resources are scarcer than was thought a few years ago,” the official said. “We agree there is a need for more transparency on the potential supply of various areas.”

If scarcity is the chief culprit, the oil price shock may not prove as temporary as hoped, the official said. [emphasis added]

(“WRAPUP 1-G7 finance chiefs mull oil before China meeting”
Reuters, October 1, 2004)

SEPTEMBER 4, 2004: 0800 PDT (FTW) — Oil has broken $50 a barrel. Financial pundits such as T. Boone Pickens have said that we will see $60 oil before we see $40 oil again (if ever). In the G7 and around the world from the Philippines, to Brunei, to Scotland, to New Zealand, to China, to Thailand, to Japan, to Britain, to the US, many nations are either urgently looking at and discussing impending economic collapse, blackouts and food shortages. Others are already experiencing blackouts, brownouts, power cutbacks, or projecting possible lethal power outages this winter. Economic concerns may very soon be pushed aside by issues of simple survival. China’s food production has been plummeting for years and overall the entire planet is yielding less and less food which requires ten calories of hydrocarbon energy for every calorie eaten.

Two examples: In New Zealand, the news website stuff.co.nz reported on October 1 that the country’s oil supplies were “on a knife edge”. In the Philippines on September 25, the Manila Bulletin Online ran a story headlined, “Energy Chief: Gov’t Working to Address looming Crisis”. India has begun hoarding oil, paying above-market prices to create a “strategic petroleum reserve” like America’s.

All this is happening with a current global population of six and one half billion, expected to exceed nine billion by mid-century.

For three years (and in many cases far longer) a group of dedicated men and women, recognized as being in the forefront of the movement to place Peak Oil front-and-center on the world’s agenda, have endured intense resistance – personal attacks, bureaucratic “barricades,” disinformation, and more – to convey one message and one message only: The peak of world oil production is at hand now. With it come the most serious questions ever to confront our species. Their names include: Colin Campbell, Kjell Aleklett, Jean Laherrère, Kenneth Deffeyes, Matthew Simmons, Richard Heinberg, Julian Darley, Barrie Zwicker, Ali Samsam Bakhtiari, Michael Klare, Adam Porter, Andreas von Bülow, Richard Duncan, Walter Youngquist, Jay Hanson, Marshall Auerback, The Electric Wallpaper film company, FTW’s Dale Allen Pfeiffer, Stan Goff and me (among many others).

Recent statements by the G7 group of nations and other breaking news stories have now irrevocably placed Peak Oil on the table. The bottom line is that the G7 have admitted that demand has outpaced supply and that due to cooked books and secrecy, they really have no idea how much oil is left, or available for production (two different questions). Within months there will be no more important story on the planet. After that, and as the G7 must begin to offer explanations and answers for all mankind – let alone the soon-to-be anachronistic financial markets – we will be there, dogging every announcement with our research. And we will be demanding honest answers.

In various forms and degrees, panic may ensue. Resource wars over Peak Oil and scarcity began officially on September 11th 2001 and they are now proliferating through a multitude of “proxy” wars from Southeast Asia, to the Caucasus, to West Africa (Nigeria and Equatorial Guinea among others), to Georgia, to Chechnya.

As FTW has always insisted, the principal objective of these Peak Oil activists was to get to this point of admission sooner rather than later; openly, rather than in secret, so that all of the human race, especially that majority not concerned solely with stock portfolios, net profits, share value or return on investment could have a say in a debate which will assuredly impact everyone’s chances for survival and, most importantly, the future of all the world’s children.

I hope I speak for all of us when I say that whatever we have endured, it was worth it.

We were right and this can no longer be ignored. We did it. We got Peak oil on the table and we did it before the 2004 US presidential election. Now the next question is: Will either of the candidates mention it before we vote? To do so would instantly commit the entire planet to begin looking “transparently” in one degree or another for options based upon more than economic and financial considerations. As Colin Campbell, founder of the Association for the Study of Peak Oil and Gas wrote recently, “This is the end of economics.”

It is my belief that the G7 already has a good idea of how dire the situation is, and are well into discussing “options” which they don’t want the rest of us to know about.

For all those critics who charge that there is an abundant supply of abiotic oil, or oil produced ad infinitum from the earth’s mantle we ask, “Where is it?” They have argued that we Peak Oil activists have all been shills for oil companies seeking profits and for markets seeking greater gouged returns. The G7 has just admitted that the world economy is threatened today, not tomorrow. How does it benefit oil companies or markets if no one can buy their goods and services, or if there is no power to use them with? Now is the time for these critics to produce their vast limitless energy resources, because the G7 has just admitted that everything’s falling apart. (As if we hadn’t noticed.) That’s what these “critics” argued would happen when the time came: there would be some magic switcheroo, and a new energy source would be unveiled.

Traditional economists are cornucopians: they calculate as if markets were magical sources of goods, with no ecological limits of any kind. Oil scarcity does not exist for them because they ignore it. Abiotic oil advocates believe that petroleum can be created without ancient biomass, and that it exists in terrific abundance at depths feasible for massive extraction. Oil scarcity does not exist for them because they deny it. Both groups dismiss Peak Oil at the peril of the world community, and in doing so they protect the disastrously naïve public confidence in this doomed system – a confidence expressed in lucrative stock prices, mortgages, and futures. Perhaps these “flat earth” economists and abiotic oil partisans should shift their attacks from the Peak Oil advocates to the oil companies whose share value, it seems, they have been (wittingly or unwittingly) protecting. For those who state that throwing money at the problem will solve it, how long were you all – especially pundits like Daniel Yergin – planning to wait before proving that you were right? How many people are to die in how many wars and how many are to freeze or lose their jobs before you show the rest of us this magical energy or this limitless oil you have been assuring us was there?

One cannot materialize a hot dog in a bank vault no matter how much money is there. The earth is a bank vault and we are all collectively locked inside it.

Show us the oil! People are dying now. The G7 has done everything but state that this is just the beginning unless more oil is found. Remember that it can take three years to bring a new oil field (once found) online. Don’t attack us anymore. You have said there is an easy solution. Produce it for us all, even for yourselves. For you are not immune to what is coming. We have tried to warn even you. As FTW’s energy editor Dale Allen Pfeiffer once wrote to me, “Peak Oil will defend itself quite nicely.”

Put up or shut up.

One simple fact has never changed. Before oil can be produced it must first be found. Global oil discoveries peaked in 1964 and have been declining for 40 years. M. King Hubbert predicted the US oil production peak to occur 40 years after US oil discoveries peaked around 1930. He was right. Last year not a single field of 500 million barrels was discovered (for the first time since the 1920s) anywhere on the planet. The world uses a billion barrels of oil every eleven and one half days. We are now roughly 40 years after the peak of global discovery. This simple arithmetic has never changed. The outcome hasn’t changed either.

China, in a desperate attempt to secure oil, is looking to build a pipeline across Burma to the Indian Ocean, thereby avoiding the increasingly dangerous and volatile Straits of Malacca and South China Sea (Asia Times, Sept. 22, 2004). China is also rushing to build a pipeline from Kazakhstan eastward through Central Asia from the Caspian basin, across hostile and expansive territory, some of it close to regions occupied by the US military in Kyrgyzstan. The US has been encircling China militarily since September 12th 2001. China is also cold calling on countries from Iran, to Saudi Arabia, to Venezuela, to West Africa offering large payouts for any oil it can get. More than two years ago FTW predicted this as we described China as the “endgame” of Peak Oil. Please see:

These developments come even as it is apparent that Russia is only going to build one pipeline from Siberia eastward and it will serve Japan, Korea, the Philippines and possibly Malaysia – instead of China. The world’s second largest oil importer is projected to have more trucks and cars than the US by 2030. Its economy is still growing at about 7% a year in spite of power shortages and blackouts in Shanghai and elsewhere, which have slowed production at American, Japanese and Korean-owned plants full of outsourced labor. Like its geostrategic and economic competitors, China is desperate for oil. These are not FTW’s words. Why don’t you report that, Lou Dobbs?

As the Straits Times reported on October 2, 2004:

‘It’s the attitude of the Myanmar government. Now they agree to have discussions. Previously, they refused,’ Prof Wang told the media, suggesting that Beijing had put the pipeline on its drawing board.

‘China’s need for oil is great and urgent. Any pipeline, any route, would be beneficial.’

Almost every nation is now in a scramble for energy. On Septmeber 14, as reported in the Independent, Tullow oil, one of Britain’s largest oil companies, warned of blackouts and heating shortages this winter. Why? The North Sea fields are drying up faster than a pair of swim trunks on a hot summer day. A Times of London story the same day warned of power cuts this winter, along with shortages of heating oil. These developments prompted Britain’s Chancellor of the Exchequer Gordon Brown to warn the G7 on October 1 that oil prices were a threat to global economic “recovery” (Reuters). Isn’t it amazing that the financial guys never talk about survival? They only talk about growth and recovery. That’s why economics and the current financial paradigm need to go the way of the Dinosaurs and Saber-toothed tigers almost immediately.

As we have said from the start, and as I conclude in my just-released book Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil, we will change nothing at all and we will come, collectively as a species, to a sad and miserable end unless we first change the way money works. That, and nothing less, will make a sizeable difference in the outcome.