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ASPO November Newsletter (text only)

Full versions with images of this newsletter are available at the following links:

pdf: http://216.187.75.220/newsletter47.pdf
Word: http://216.187.75.220/newsletter47.doc

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THE ASSOCIATION FOR THE STUDY OF PEAK OIL AND GAS

“ASPO”

  NEWSLETTER No 47 –NOVEMBER 2004

ASPO is a network of scientists, affiliated with European institutions and universities, having an interest in determining the date and impact of the peak and decline of the world’s production of oil and gas, due to resource constraints.

The following countries are represented: Austria, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

Missions:

1. To evaluate the world’s endowment and definition of oil and gas;

2. To study depletion, taking due account of economics, demand, technology and politics;

3. To raise awareness of the serious consequences for Mankind.

Newsletters: This and past newsletters issues can be seen on the following websites:

www.asponews.org

http://www.energiekrise.de (Press the ASPONews icon at the top of the page)

http://www.peakoil.net

A Spanish Language edition is available on www.crisisenergetica.org

 

CONTENTS


436. The Peak Oil Economic Crisis

437. An Elegant Solution

438. The End of Dollar Hegemony

439. Japan Wakes Up

440. Country Assessment – Denmark

441. Many a truth in jest

442. Correction to Item 430

443. Meeting on Peak Oil in Koblenz

444. Temperature Control - A very important observation

445. 2004 World Energy Outlook by the IEA

446. Oil Prices Continue to Soar

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436. The Peak Oil Economic Crisis

The following is a compelling article

 

The Man who Foresaw Skyrocketing Oil Prices

by Adam Porter 30 September 2004

In a world dominated by self-censorship, only the brave speak out. But in a world running on cheap energy, with all the consequences that it brings, only those who value their integrity above their wallet are worth listening to.

Back in April one man, Iranian oil and energy analyst and expert Ali Bakhtiari did just that. He stood up and made a prediction that could have seen him ridiculed.

"By the end of the year we will see oil at $50 a barrel," he told an audience at the annual gathering of the Association for the Study of Peak Oil (ASPO) in Berlin.

To make a prediction that takes in record high prices is one thing. To name the price is another altogether. But now, while OPEC, the major industrial nations and Saudi Arabia chant their mantra that there is "no problem", Bakhtiari seems more vindicated than ever.

Out of control

Trouble is, the rise of oil's price range is an undoubted economic threat. Not to the super rich, the top 1% of global earners, or the super poor, the 50% of the world's people who live on less than $2 a day, but to everyone else. Around three billion of us.
"I am afraid I think the price will go higher," says Bakhtiari worryingly. "I had hoped it would stay in the $40 range. I think, at that level, economies could start to cope, but now the price of oil is out of anyone's control."

Bakhtiari says, "I hope that we don't move into a fifty-dollar range. The big economies, and by that I mean the US, the EU, China, India and Japan, are just starting to get used to the idea of $40 a barrel. We have passed that financial and psychological barrier, but if we moved straight into the $50 range, then that is not good at all."

However, he does not see the forty-, or fifty-dollar, range as something that will last forever. Indeed not even for very long at all. Instead, he says the price is being driven by something far more fundamental.

Peak oil syndrome?

"No one can restrain the price any more. For example, everyone thought that it would be OPEC who could manage demand. But that is now in the past.

Now it is really peak oil that is behind the wheel of the car. Peak oil is driving the rise in price and demand is not the real question. We are entering a new era, but we are only at the very beginning of it."
The idea behind "peak oil" is this. That, as the planet reaches the halfway point of consuming all its available oil, then a combination of bullish demand, slowing fields and insurmountable supply bottlenecks will create brutal price shocks. Almost certainly slicing the head clean off the world economy in the process.

This peak in oil supply will act as an economic guillotine. Yet the thread suspending the blade above our heads will be released without warning.

Politicians, producer countries, major oil companies and consumer states are not about to announce their own demise. It would not be good for business, or re-election, or both.

Unstoppable

"If there was nothing to be worried about, then there would be no price increases," explains Bakhtiari.

"If there is no reason to worry, because there is plenty of oil and OPEC or Yukos or whoever can simply pump some more, then there would be no problems and no rises in price. The market would not be worried at all."

Whilst Bakhtiari admits predictions are fraught with danger, his own research, so far extremely accurate, says peak oil has yet to arrive. Like Hurricane Ivan blowing in from the ocean, we may only be experiencing the first stormy gusts.

"I think the peak will arrive around 2006, 2007. But, this is only 15 months away. That is all. At that point, no one can say what is going to happen. Except the price is going to go up. And no one will be able to stop it."

 

437. An Elegant Solution

As is well known, Russian oil companies had signed a contract for the development of the West Querna Field with the previous sovereign government of Iraq, but the rights were extinguished in the Anglo-American conquest of the country. Now, the US company, Phillips-Conoco, has signed an accord with the Russian company, Lukoil, to acquire an 18% interest in West Querna, together with a 30% interest in fields in the Russian Arctic province of Timan Pechora. It is an elegant construction that would have appealed to Calouste Gulbenkian, the founder of the Iraq Petroleum Company in the early years of the last century. It allows the puppet regime in Iraq to give at least partial recognition to the contractual obligations of the country inherited from the previous sovereign government. It allays Russian pressure and accommodates the conquerors. West Querna is reported to hold reserves of about 8 Gb. The United States consumes 7.3 Gb a year, so the 18% is equivalent to about two months demand, but every little helps, despite the great cost in lives and money to obtain it.

However, the gesture carries some costs insofar as recognition of the previous government’s obligations may expose the puppet regime to responsibility for Iraq’s mammoth foreign debt, much to Russia. The financial community would like to write off such debt without setting a precedent. This would be achieved by the disintegration of the country leaving no entity to inherit the debt. Such a disintegration, which is indeed likely to occur, may have been intended to strengthen Israel’s position, so the new oil deal seems anomalous in some respects.

It is now reported (Lancet) that the Anglo-American invasion cost the lives of at least 100000 Iraqis, including many women and children. There are many grieving families with strong feelings and predictable reactions, as discussed by Professor Klare in his book Blood and Oil.

 

438. The End of Dollar Hegemony

Janet Bush, who may be no relation, is writing a book on Dollar Hegemony. The message seems to point to a stockmarket crash of unparalleled magnitude. She writes:

The US dollar has long been the currency of the oil industry. But members of Opec are contemplating ditching greenbacks. The results could be catastrophic for the American economy

However darkly terrifying America's Iraqi horror story, a small voice of comfort has broken through US night sweats. You are still the most powerful and richest nation on earth: you will get through this, it murmurs. But that reassuring whisper comes from a small devil on America's shoulder, speaking mischief that will land the listener in deep trouble.

A great many people - if not in the White House - have grasped the reality that America's huge, all-conquering economy is genuinely vulnerable for the first time since the 1930s, and that its fragility coincides with a period of expanding and expensive military exposure around the world.

US bestseller lists are stuffed with books agonising about whether the American Empire is finally coming to a close; uncanny parallels are drawn between the military and financial overstretch of imperial Rome and imperial Washington. George W Bush's pre-emptive doctrine in foreign policy is enormously costly; on top of billions of dollars' worth of tax cuts, largely for the rich, it is prohibitive. It is predicted that the federal budget deficit will reach $2.4 trillion over the next ten years. To finance that deficit, the US needs to persuade investors - more often than not from overseas - to lend it up to $4bn net every day.

Even without America's apparently infinite capacity for foreign military adventurism (how much would tackling Iran or North Korea cost?), its fiscal outlook seems dire. Two experts on the US budget position, Niall Ferguson and Laurence Kotlikoff, estimate that the country faces a $45 trillion gap between the money it has and the money it needs to finance existing social security, Medicare and pensions commitments ahead.

It is not just the federal government that is in trouble. When adjusted for inflation, the wage for the average American male working full-time has fallen over the past 30 years; and, because of that, five times as many mothers - even those with young children - must now work to make a decent living wage. Not since the Depression have Americans saved so little and, at the same time as running down their rainy-day money, been so neck-deep in debt. By 2003, total debt had soared to $37 trillion; that's $128,560 for every man, woman and child in the country. Some of that debt has been racked up on mass retail therapy (Americans love to say "when the going gets tough, the tough go shopping"), but a lot of it has been the inevitable result of the Average American Joe struggling to make ends meet.

The richest nation on earth is living way beyond its means, and yet the Bush administration blithely continues to spend. It takes no steps to rein in the deficit - sometimes, indeed, it seems that the deeper the deficit, the more reckless the administration becomes. No other nation on earth can behave this way - in every other case, governments know that if their deficits run out of control, they will be "punished" by the market: investors will lose confidence, interest rates will have to be raised to attract capital, financing the deficit will become more expensive, and a vicious spiral will be in place. Why, then, can the US run a deficit of more than 5 per cent of its gross domestic product and still manage to attract $4bn a day at interest rates of only 1.75 per cent?

The US has been running a bubble economy for decades; the recent dotcom boom and bust was a minor episode in a history of deficit-financing since the 1960s. Then, as now, the US borrowed with impunity; whereas other countries have always had to choose between guns and butter - foreign policy expansionism or domestic prosperity - the United States has spent profligately on both. John F Kennedy spent freely on New Deal social programmes and the Vietnam war; George W Bush has emptied the coffers on tax cuts and Afghanistan and Iraq.

There has never been a shortage of people willing to lend to the US; after all, as the richest nation on earth, it has to be good for the money, doesn't it? Even when investors have become nervous about its profligacy, there has been plenty of credit because the US economy is a crucial market for the world's producers. In living memory, the United States has been the sole engine powering the world economy: there has been no alternative to continually injecting it with fuel

But the US has a stick to add to the carrot: since the end of the Second World War, it has had the unique privilege of "owning" the world's reserve currency - the notes and coins used for trade and investment more than any other currency for 60 years. This confers unimaginable advantages. America is able to ignore the discipline of having to balance its books because, if it runs out of money and can't find anyone to bail it out, it can simply print dollars, inflating away the value of its debt and destroying the value of the assets held by its creditors. In other words, it can threaten financial blackmail.

In the 1970s, European and Asian governments started complaining about lending America the money to finance the Vietnam war; the US simply responded by engineering a catastrophic fall in the dollar, which erased its deficit over time but also crucified the economies of its trading partners in the process. Now, with the deficit soaring again to finance foreign wars, the US is repeating the trick. It has encouraged the dollar to fall; exporters to the US such as China and Japan have had no choice but to try to arrest that decline to protect their trade. How? By buying dollars, which they invest in US treasury bonds, thus financing the deficit. How very neat.

But the United States cannot count in perpetuity on winning this game of financial chicken, based on the pre-eminence of the dollar. Its angriest political enemies have worked out the game and have been mulling over their counter-moves. Al-Qaeda has already targeted the soaring symbols of US economic power, from the twin towers to the New York Stock Exchange; now Muslim fundamentalists are trying to topple the dollar. A plan being pushed in particular by Mahathir Mohamed, former prime minister of Malaysia, for a new gold-backed Islamic currency - the dinar - is a rallying point. "Stealth Bomb to Dollar: Islamic gold dinar!" one website proclaims, describing the currency as "the second prong to planned Muslim terrorist attacks on the United States, intended to annihilate US economic power in a world of rising gold prices and a persistently declining dollar". The dinar, it says, is the tool of "monetary jihad".

Rejection of the dollar is increasingly being used as an act of political aggression, and nowhere more acutely than in oil-producing countries. The trailblazer was none other than Saddam Hussein who, in 2000, announced that Iraq would henceforth make all its oil trades in euros, a decision that conspiracy theorists - and not a few eminent Middle Eastern experts - say triggered the US invasion. The United States derives substantial benefits from the dollar being the established currency of the oil industry. Because most countries import oil, they must maintain reserves in dollars to pay for it - two-thirds of the world's currency reserves are kept in dollars. This is a major factor upholding the dollar's position as the world's reserve currency; a switch out of dollars in the oil industry would be a major assault on the currency's pre-eminence.

In April 2003, Indonesia's state oil company, Pertamina, said it was considering using the euro for its oil and gas trades. Even more significantly, in October last year President Vladimir Putin hinted that Russia, the world's second-largest oil exporter, might switch to euros. A Russian move would be enough to tip the balance for other major oil producers. As Arab disapproval of the US war in Iraq has mounted, so a consensus for switching out of dollars has been building; Opec has openly discussed the option and even Saudi Arabia, once America's staunchest Middle Eastern ally, is reported to be considering rejecting the dollar. For now, the euro is the most viable alternative; in future, it could be the Islamic dinar or, far more likely, a new Asian currency.

Western storytellers would relate the tale of the emperor, his new clothes and the little boy who saw his nakedness; perhaps Arab fablers might talk about desert mirages. America's economic dominance was once real; it is now a receding reality, a confidence trick. Washington might ponder that before scattering its dollars and daisy-cutters next time around. Reference furnished by William Tamblyn

 

Another article in http://globalresearch.ca/articles/CLA410A.html tells a similar story:
The Iranians are about to commit an "offense" far greater than Saddam Hussein's conversion to the euro of Iraq's oil exports in the fall of 2000. In 2005-2006, the Tehran government has a developed a plan to begin competing with New York's NYMEX and London's IPE with respect to international oil trades - using a euro-based international oil-trading mechanism. This means that without some form of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the neoconservative project for U.S. global domination, Tehran's objective constitutes an obvious encroachment on US interests in the oil market. Reference furnished by Jens Junghans

439. Japan Wakes Up

Reuters reports as follows:

Japan's Vice-Fiance Minister, Koichi Hosokawa, said the G7 would have "meaningful discussions" on oil. But he added it would be difficult to take any specific steps to curb prices. 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 supply scarcity is indeed the culprit, the oil price shock may not prove as temporary as hoped, the official said. Reference furnished by Richard Miller

 

440. Country Assessment - Denmark

Denmark is a flat-lying country covering 43 000 km2 in northern Europe that separates the North Sea from the Baltic. It supports a population of 5 million, of whom about one quarter live in the capital, Copenhagen. The people, descended from late Neolithic stock with blue eyes and fair hair, now enjoy both a low fertility rate and high longevity.

DENMARK Regular Oil
Population M 5.2
Rates Mb/d  
Consumption              2003 1.94
    per person b/a 13.6
Production                  2003 0.368
Forecast 2010 0.226
Forecast 2020 0.106
Discovery 5-yr average Gb 0.054
Amounts Gb  
Past Production 1.47
Reported Proved Reserves* 1.28
Future Production - total 1.78
From Known Fields 0.98
From New Fields 0.8
Past and Future Production 3.25
Current Depletion Rate 7.0%
Depletion Midpoint Date 2004
Peak Discovery Date 1971
Peak Production Date 2002
*Oil& Gas Journal

The Danes resisted Charlemagne’s Frankish pressure from the south in the early years of the last millennium, heralding the emergence of a strong Viking power in the 7th Century. Danish Vikings settled in Normandy, later to successfully invade Britain in 1066, where they met in battle Norwegian Vikings who had landed on England’s east coast. Danish Vikings also occupied Greenland, Iceland and the Faroe Islands

A union with Norway and Sweden followed in 1397. It was achieved largely by propitious royal marriages, and lasted until 1523, but it was an uneasy relationship accompanied by dispute and conflict.

Deforestation in the Middle Ages to fuel iron-making led to a ecological catastrophe, as sands blew in from the North Sea destroying agricultural land.

Denmark sought armed neutrality in the Napoleonic wars, but was regarded as a hostile power by Britain, which launched an attack on the capital and captured the fleet. Denmark reacted by aligning itself with Napoleon in 1807, whose eventual defeat forced it to cede what is now Norway to Sweden in 1814. The southern province of Schleswig Holstein was lost to the Prussians in 1866, but recovered in 1920 under the Treaty of Versailles, following a plebiscite. Denmark was neutral during the First World War but occupied by the Germans during the Second. It became a founder member of the European Union.

Denmark pioneered the use of wind energy, and managed energy supply at a local level, but that sound strategy has been undermined both by EU directives and the current Government, following outdated economic policies, being partly influenced by the environmental sceptic, Mr Lomborg, a prominent flat-earth Fundamentalist.

Onshore exploration commenced prior to the Second World War but did not meet with success. Denmark established jurisdiction over its share of the Continental Shelf under a treaty with the other North Sea countries, signed in 1965, which gave it rights to the southerly limits of the prolific Central Graben and extensions thereto. One of the first oil discoveries in the North Sea was in fact made in Denmark in 1966 after some 30 abortive wells had been drilled. Subsequent exploration has been at a modest level, but a number of discoveries were made, primarily containing the difficult Chalk reservoirs, as found in adjoining Norwegian waters. In total, some 2.5 Gb have been found, of which 1.5 Gb have been produced. Exploration is at a mature stage after some 170 wildcats, and is here expected to end around 2020 having yielded a further 800 Mb. Indigenous production peaked in 2002 and is set to decline at about 7% a year. The country consumes about 195 Mb/d at a relatively high per capita level of 13.6 b/a, becoming a net importer by 2012. Gas reserves stand at about 4.3 Tcf. Current gas consumption stands at 0.183 Tcf/a slightly below production of 0.292 Tcf/a, with the country set to become a net importer within the next few years.

440. More on Saudi Reserves

Mr Saleri, the head of Reservoir Management for Saudi Aramco, has made an explicit presentation to the Society of Petroleum Engineers in Houston, at which he stated the Saudi reserve position as follows:

a. Past Production.              100 Gb
        b. Remaining Proved Reserves    260
        c. Probable Reserves              32
        d. Possible Reserves               71
        e. Contingent     238
               TOTAL                     701 Gb

He further reported that water cut has decreased from 36.5% to 33%. Oil-in-Place is evidently 600 Gb (100+260 +32= 392 divided by 65% recovery). The Probable assumes a 5% increase in recovery to 65%, while the Possible assumes a 77% recovery, which is a theoretical maximum from complete areal and vertical waterflood sweep. The contingent is made up of 138 (23% of O-i-P), being the balance between 100% and 77% Recovery, and 100 Gb for undeveloped notional discovery.

The impression from these calculations is that the reports are somewhat abstract and theoretical. More credence rests on the report by al-Husseini, the former head of Aramco, who recently wrote that Proved Developed Reserves stood at 130 Gb. The latter also recently stated in a BBC broadcast that US estimates of future production were seriously overstated.

Earlier newsletters have advanced various lines of reasoning to suggest that the 260 Gb reported as remaining reserves are in fact original reserves, from which the 100 Gb produced has to be deducted. This would explain why the officially reported reserves have barely changed since the anomalous increase from 170 to 258 Gb in 1990. Whatever else may be deduced, the official dataset since 1990 is clearly implausible.

Possibly, part of the confusion arises from the fact that the Ghawar Field, the largest field, is made up of contiguous, but distinct compartments, having different names. The northern end, including Ain Dar and Shedgun, has been in production since the 1950s, and is no doubt at an advanced stage of depletion with rising water cut, whereas the southern end, known as Haradh, was not brought into production until 1996. One may suppose that the better reservoirs were produced first, such that the experience gained there may not apply throughout the field. Possibly the early reserves estimates referred simply to the northern end of the field and not to the field as a whole. In terms of peak production, little practical significance attaches to the Probable, Possible and Contingent categories, and the main doubt remains over whether the 260 Gb Proved includes or excludes the 100 Gb of past production.

 

441. Many a truth in jest

The September issue of Vanity Fair, a popular magazine, which tends to be found in the lobbies of hotels, carries an amusing article, giving extracts from the Diary of a Private (First Class), named Ricky Gonzalez. He was deployed in a search party, checking caves in Afghanistan where he encountered Osama bin-Laden, pictured with his dialysis machine. On reporting the find, his Captain was instructed to bring a sealed van to ship the prisoner to the airport and on to a ranch in Texas, so that the search could continue. Ricky Gonzalez was retained as a bodyguard, and enjoyed his life at the ranch, watching the prisoner and the Bush family playing tennis, pictures of which are included in the article.

 

442. Correction to Item 430: Column 6 of the Table should read Total 492 Gb

 

443. Meeting on Peak Oil in Koblenz

Alexander Oil & Gas organised an important meeting on October 19-20th in Koblenz in Germany to address the issue of peak oil. It was attended by delegates from many countries and organisations. C.J.Campbell set the scene with an outline of petroleum geology, stressing that the discovery trend of the past offered the best means of forecasting future production. J.M.Bourdaire presented the new position of the World Energy Council, which now accepts both the reality of an imminent decline in World oil production and the dire consequences. D. Reynolds confirmed the assessment in economic terms, referring especially to countries deemed to be “risk averse”. Professor dos Santos explained the weaknesses of Brasil’s energy policy, and Shri Arora discussed the situation in India. Ken Chew of IHS was however rather dismissive of peak, emphasising how reported reserves had in the past been subject to upward revision. Jeremy Leggett demonstrated the impressive possibilities for solar energy, in part helping to meet the concerns about climate change, expressed by Professors Rahmstorf and Krieger. Alexander Wöstmann closed the meeting stressing the scope for improved energy efficiency.

Perhaps, the most notable element was the report of the new position of the influential and prestigious World Energy Council, which has evidently come to accept the importance of Peak Oil.

 

444. Temperature Control - A very important observation

Paul Nadeau and Per Arne Bjǿrkum, researchers with the Norwegian national company Statoil, have made a very important contribution to the assessment of world oil. The temperature controls on oil generation have long been known, but this research shows that the bulk of the World’s productive oil and gas reservoirs occur within a temperature range of 60 to 120 oC . Evidently, temperature controls pore-pressure, fracture thresholds, sealing conditions and biodegradation, with optimal conditions for migration and preservation being found within this range. The so-called Golden Zone lies at different depths in different basins, depending in geothermal gradient. It is for example shallow in the Bombay High off India and deep in the Gulf of Mexico. It is impossible to exaggerate the importance of this discovery in terms of evaluating World oil ands gas resources and the status of depletion. (See Halfdan Carstens in GEO Expro, September 2004)

 

445. 2004 World Energy Outlook by the IEA

The International Energy Agency has now published the 2004 Edition of the World Energy Outlook. Mr Mandil, the new President, states in the introduction that the “publication is acknowledged worldwide as the single most important source of energy statistics, projections and analysis”. Indeed that may be the case even though the information provided is singularly unreliable and misleading, as is to be expected from an organisation dealing with a very sensitive subject and facing political pressures from its member governments. That said, as in the past, valid hints of the true position do emerge from between the lines.

On Page 92, the report explains the spurious upward revisions of reported Opec reserves in the 1980s

On Page 99, it points out that exploration drilling has been declining for lack of prospects, showing a flattening curve of discovery versus exploration drilling. Some 75 000 wildcats have yielded about 2250 Gboe of oil and gas. (Extrapolating the curve suggests that if as many wildcats were to be drilled in the future as have been drilled it the past, the total discovery would barely exceed 2500 Gboe)

On Page 103, it admits to the issue of peak production but relates it to the resource base, calling for better definitions and transparency. It rightly explains that that the lower the resource base the sooner the peak. It relies heavily on the flawed USGS study to consider three scenarios with Ultimate Recoveries of Conventional oil of 2239, 3165 and 3739 Gb, giving peak production in respectively 2015, 2030 and 2035. The corresponding peak production rates are 96, 121 and 142 Mb/d, to which is added 10, 37 and 8 Mb/d from non-conventional sources. It adds that “if ultimately recoverable resources are at the low end of the current range of estimates and reserve additions are slower than expected, conventional oil production would peak within the next two decades”. It further admits that most of the envisaged production for 2030 will have to come from capacity yet to be built, showing that current capacity declines rapidly.

On Page 109, it sees great potential for more discovery in Brasil (quoting an undiscovered potential of 55 Gb taken from the USGS) which is highly questionable to say the least.

On Page 111, it admits that the existing Saudi fields are set to decline at about 6% a year, yet has faith in the potential of undeveloped discoveries which it hopes can lift production to 12 Mb/d and maintain this level to 2033, a most dubious proposition given that the undeveloped discoveries are smaller by orders of magnitude.

On Page 112, it claims that Iranian production could double by 2030.

On Page 113, it quotes a Nigerian government aspiration of increasing production to almost double current production by 2006, which is clearly implausible

On Page 115, it estimates that non-conventional heavy oil and tarsand production in Canada and Venezuela may rise to about 6 Mb/d by 2030, which sounds reasonable. It rightly stresses the constraint of falling gas supplies in Canada to fuel the plants.

On Page 121-2, it admits that three-quarters of future investment will be dedicated to trying to ameliorate the decline of existing fields. The hypothetical total investment needed to deliver the envisaged production to 2030 is estimated at $3 trillion, but adds that several factors could discourage investment, an oblique way of that the production target will not be met in the real world.

On Page 126, it realistically accepts that persistent high prices would cut demand

 

All in all, it is a useful document, well worth detailed examination, primarily to dig out the messages that lie between the lines, and identify the evolving trends and pressures by comparison with positions taken in earlier editions. For example, the 1998 Edition anticipated that demand by 2020 could be met only by introducing a “balancing item of unidentified unconventional oil”, which miraculously rises from zero in 2010 to 19 Mb/d in 2020. It was clearly a coded description of rank shortage, but disappeared without mention or explanation from the next edition, when journalists decoded the message.

The skills of a detective are needed to penetrate most aspects of peak oil analysis, and although little can be accepted at face value, the World Energy Outlook is fertile ground for clues. A psychologist could also evaluate the mental agony of those responsible for compiling the report as they search to deliver comfort and conceal the contrary evidence that confronts them at every turn. (A full analysis of the report by Professor Aleklett is to appear on www. peakoil.net )

 

446. Oil Prices Continue to Soar

Not long ago, OPEC was agonising if it could restrain production sufficiently to hold prices in the $22-25 band. That in fact did not prove difficult, as the old fields continue to decline. They then moved to a band in the high $20s. That did not last long either, and prices began to soar passing the $50 threshold. This prompted an avalanche of commentary from around the world as analysts searched for facile explanations in terms of demand from China, a hurricane in the Gulf of Mexico, a Norwegian oil-workers strike, or disputes in the Niger Delta.

Profits for the oil companies soared in parallel to embarrassing highs. They had been diligently buying their own stock and increasing the dividends to their shareholders, knowing full well that there were fewer and fewer worthwhile prospects to test, but they came under pressure to invest more in exploration. They then reacted by saying that they were denied access to the Middle East. But Shell for example has announced major new investments in exploration to redeem its honest but tarnished image. It can certainly afford to do so as the high prices give high profits attracting high taxes, against which abortive exploration expense can be set. OPEC itself has never seen its role to add production to reduce price, save perhaps in fear of loss of market share, which is no longer a realistic fear, with most non-OPEC countries in decline, despite every effort.

There is now virtually no spare capacity anywhere, but prices can certainly fall if demand collapses as a consequence of a deep and deepening recession. Probably, the US election will represent a turning point, whoever finds himself in the White House. Presumably, the investment community is already making its dispositions, but faces a balancing act between protecting its own interests and those of its privileged clients without at the same time triggering a general melt-down that would adversely affect the proceeds from the management of institutional funds. It will soon be possible to which of the candidates they preferred.

 

 

 

Calendar - Forthcoming Conferences and Meetings

The subject of Peak Oil will be addressed at the following conferences and meetings, with presentations being made by ASPO members and associates [shown in parenthesis]:

2004

November 2nd - Permaculture Association, Clonakilty, Ireland [Campbell]

November 5th – Community Action, Ballyvaunie, Ireland [Campbell]

November 10th – Oil Depletion, Institute of Energy, London [Bentley, Skrebowski]

November 15th – Swedish Bio-energy Association, Stockholm [Aleklett]

November 17th – Swedish Green Party, Stockholm [Aleklett]

November 22nd – Oil & Agriculture, Chamber of Agriculture, Strasbourg [Laherrere]

November 24th – Swedish Oil & Gas Network, Stockholm [Aleklett]

November 29th - Green Party Meeting, Dublin [Campbell]

2005

January-February – Post-Fossil Mobility Conference, Berlin [Blendinger] (date pending)

February 10th – Irish Government Conference on Security of Supply, Dublin [Campbell]

- Institute of Petroleum, London [Gilbert]

April 14-15 – Swiss Pension Fund Managers, Interlaken [Campbell]

April 22nd – Sanders Research, London [Campbell]

April 25th – Depletion Scotland, Edinburgh [Campbell, Skrebowski, Simmonds]

May 19-20th - ASPO International Workshop, Gulbenkian Foundation, Lisbon [various]

 

[The calendar will be a standard feature of future newsletters. Information on future events is welcomed]

 

 

 

The Newsletter is distributed with the help of Rory O’Byrne and Arne Raabe in Canada, and several generous financial contributions have been received from others to defray operating costs. All are gratefully acknowledged. Articles and references from readers wishing to draw attention to items of interest, or the progress of their own research, are welcomed.

Permission to reproduce the Newsletter, with acknowledgement, is expressly granted.

Compiled by C.J.Campbell, Staball Hill, Ballydehob, Co. Cork, Ireland

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The Emerging Iranian-Turkish Energy Partnership

The differences in energy outlooks between Tehran and Ankara have created a …

The Ukraine conflict, peak cheap gas and the MH17 tragedy

The number of countries with fossil fuel conflicts and wars is increasing. …

Peak oil notes - July 31

A mid-week update. Crude prices continued to fall this week as markets …

New Russia Sanctions: Washington, Delusional About US Energy Capacity, Lashes Out

The effect of the sanctions will be to speed the Russian decline, forcing up …

Shales vs. solar: An investment perspective

But perhaps the real proof of a new energy paradigm shift lies in the fact …

Peak Oil Review - July 28

A weekly review including Oil and the Global Economy, The Middle East & …

The Changing Face of World Oil Markets

My conclusion is that hundred-dollar oil is here to stay.