Richard Heinberg on megaprojects update
This is Julian Darley for Global Public Media, on the 18th of April, 2005, interviewing Richard Heinberg, in Santa Rosa, California. There’s been quite a lot of interesting news lately that suggests world oil supplies are becoming critical. Would you like to give us some comments about this?
Well I think the best data we have on this right now are coming from petroleum review and Chris Skrebowski – he’s just released an April 2005 update to his oil field megaprojects study, which originally came out last year. What he’s doing of course is to look at new supplies that are going to be coming online this year, next year, the year after and so on to 2010. And this is something that can be determined with a fair degree of accuracy because it does take a lot of investment, capital, and also a lot of time to get one of these projects up and running. So these are very difficult things to keep secret, and they’re not the sort of things that get, you know, sprung on one out of nowhere. So we have a pretty good idea from Chris’ work as to what new supply is about to appear on the horizon.
And it’s not very reassuring. He suggests there’s something in the range of 2 million barrels a day of new production capacity that’ll be brought online this year, in 2005. But then the International Energy Agency is saying that pretty close to 2 million barrels a day of new demand will appear this year. So supply and demand are going to be very closely balanced throughout the year – and there’s a lot of uncertainty, on the demand side especially.
On the supply side there are some uncertainties as well. I mean we know what new projects are coming on but we don’t know how fast some countries may enter the depletion phase. We know that some countries have passed their all-time oil production peak or are nearing it, and in those situations we really need new production capacity to offset that.
Now we know that the U.S. is going to produce less oil in 2005 than it did in 2004. We know that Indonesia will, and so on… but how ‘bout a country like Saudi Arabia? It’s very possible that Saudi Arabia is nearing its all-time oil production peak, which would really throw a monkey wrench into the works. Russia, we don’t know whether Russia will be able to continue increasing its production capacity or stay stagnant during 2005 or if Russia may be beginning a sort of slow decline.
These things could impact that balance between supply and demand very significantly because it’s such a close balance right now. We don’t really know if we’ll be able to get through 2005 with enough supply to meet demand, and I think that’s the real significance of what’s going on here. 2005 may turn out to be the all-time oil production peak, or not. We don’t know that yet. But it’s looking very likely that 2005 will be the first year in which new supply is unable to meet new demand. And that really puts us into a whole new era in terms of the oil industry on planet Earth.
You mentioned some of the countries which look as if they’re going to be moving into the decline phase. What do you make of Mexico’s situation, after all an incredibly important supplier to the U.S.?
Yes, and Mexico has basically said that Cantero – which is its largest field in the Gulf of Mexico, and really the most important field right now in the Americas – is likely to enter decline this year, which is – that’s very significant. Because we’re seeing the list of exporting nations grow shorter with each passing year and the list of importing nations grow longer.
This is not an old phenomenon, this really only goes back about three decades. The U.S. was the first significant oil-producing nation to move from being an exporter to an importer. And the pace at which countries are doing this is picking up. We’ve seen Great Britain and Norway go over the top in terms of oil production peak. Now Great Britain is becoming a net oil importer this year.
Indonesia is likely to be as well, and of course Indonesia has been a stalwart member of OPEC for all these years – the Organization of Petroleum Exporting Countries. Well if Indonesia becomes a net importer, can it even remain a member of OPEC? That’s an open question.
Are there any other places in the world which either are looking at geologically bound constraints if you like, or other possible difficulties? I’m thinking for instance of Nigeria but there are others.
Right, well when you get to questions of politically-based interruptions in supply then the conversation really gets speculative – but also very worrisome, because we have countries like Iraq and Iran and Nigeria where either internal conflict or external invasion or attack are really very open questions for the coming year. Washington is making very hostile comments about Iran these days and if there were an attack – either by Israel or the U.S. on Iran within the next 12 months – that would certainly throw all of our predictions into the trash barrel. We would be certainly in a very dire time in terms of global oil supply.
Do you get the sense that the imminence of peaking and then soon after that decline is starting to percolate into more quarters on any side of the political divide and indeed in places which might call themselves non-political?
Absolutely. We’re seeing more mention on the business pages and newspapers on this subject, and on both sides of the political spectrum. There was an amazing speech on the floor of Congress just a few weeks ago by a conservative Congressman that ended up being I think four pages in the Congressional record for March 15th. These are things that were unheard of two or three years ago. Back then if you talked about Peak Oil people looked at you strangely. They had no idea what you were saying.
These days people who are savvy – who are readers, who look at the news – generally understand that cheap oil is at an end, and more and more people in the mainstream are saying that. They’re not necessarily talking in terms of Hubbert’s Peak and global peak in oil supplies, but there’s a general understanding now that the days of $10 a barrel oil certainly – and even $25 or $30 a barrel of oil – are past and we really have to get used to $50, $60, $70 a barrel of oil for the coming year or two.
Do you see signs of reaction from the American consumer – one says the American consumer because America of course is such a large consumer of oil and everything that America does has a resonance for the world. The average price I think last week was ending up toward $2.28 a gallon, which is rather a joke for a European – that’s practically free – but do you think that such things as rising gasoline and rising heating costs are making a difference to U.S. thinking and behavior?
That’s a difficult question to answer. Yes, at a certain level, Americans are getting very concerned about high energy prices. But they really don’t know how to think about the problem. They haven’t been educated very well to understand where their energy comes from or why the U.S. is dependent on oil imports. I think if you asked 100 Americans, you know, about the state of U.S. oil production they’d stare at you blankly. They have no idea that America was the world’s foremost oil producer only a few decades ago and went through its own oil production peak in 1970.
Now to me, that’s probably the most important economic event of the 20th century, at least for the U.S. And yet Americans really don’t understand that at all. So when they look at the price at the gas pump today they’re speculating as to whether the oil companies are gouging them or maybe it’s the folks in the Middle East who are withholding supply and trying to drive up prices. They really have no idea what’s going on.
And what might be going on is that if peak is coming as soon as the evidence is starting to point to then talk of peak becomes of historical interest and then, surely, the talk should then turn to decline. How do you think that’s going to play out?
Well, it’s impossible to say, because we are in entirely new territory here. As soon as supply is unable to keep up with demand – and I think that’s going to happen probably before we reach the actual peak by a year or two – but it’s hard to say. And certainly by the time we actually reach the peak we will be in very new territory in terms of economics and geopolitics.
If we can get through this critical period without a significant war starting I’ll be a happy man, I’ll tell you (chuckles). Because I think this is a very critical period for global war and peace. The sort of reflex reaction of governments in this situation – where their economies are in peril – is to find scapegoats to blame. And one can see this process beginning right now – actually over the last couple of years – where the scapegoats are being lined up on both sides.
So I’m very concerned about the geopolitical implications of all of this. And also as the economy starts to turn sour because of high energy prices I think people in places like America, that are so dependent on oil and on oil imports, are going to react in rather unpredictable ways. They’re used to having their cheap easy way of life and when that starts to erode from beneath their feet they may grow restless in various ways.
Can you be a little more specific? Because a lot more people are becoming very worried about these restless ways.
Yes. Well, I think the U.S. Federal government has been busily putting in place a kind of authoritarian infrastructure over the last four years with the Patriot Act and various other measures. And I think ultimately these are intended – at least partially – for domestic use, to control social disorder, as the economy starts to come apart.
When we see unemployment figures nudging up past 10 and 20 and 25%, unemployment really hurts. I mean, when people have no way to pay their mortgage or their rent – and they’re used to a standard of living that was very easy and comfortable – it’s devastating. And I think we’re likely to see a burgeoning homeless population in this country.
These are things that people may not take lying down for very long and we may see marches and protests and so on aimed at the government. And in order to defuse that the government is first going to have to find scapegoats for the problem, and then it’s also going to have to institute some rather authoritarian measures to keep social order. And that’s regardless of whether the government is making intelligent choices or very stupid choices in terms of how to deal with the energy crisis per se.
Perhaps the most positive thing that one can say is that it is time to be realistic.
Certainly. And it’s also, I think, time to work especially at the local level. I see very little opportunity at the Federal level for policy change or the injection of sanity in whatever discussion – the geopolitical discussion, or the economic or energy discussion.
But at the local level I think things are very different, and especially in smaller towns. I’ve been doing a great deal of traveling and speaking lately and in the smaller towns where I’ve spoken, that’s where I’ve found the largest turn-outs, strangely enough. Certainly as a percentage of the population, little towns like Quincy, California – which most people have never even heard of – a couple of hundred people show up. I was just in Plymouth, New Hampshire and 350 people showed up jamming the auditorium so that people were turned away.
Now what’s encouraging is that these kinds of small towns actually have the opportunity to make some changes because local politicians listen to their constituents and decisions can be made relatively easily and quickly. One isn’t dealing with hordes of bureaucrats and lobbyists and so on. One can just call up one’s local councilperson and have an honest talk. So I think people who do live in small towns have the opportunity to make some changes and to talk to their friends and neighbors and, frankly, I think those are going to be the most survivable spots to be in the next few years.
On that practical note, I’d like to thank you very much. Thank you Richard.
Thank you Julian.
That was Richard Heinberg in interview for Global Public Media. And I’m Julian Darley, on the 18th of April, 2005, in Vancouver, Canada.
Richard Heinberg is the author of five previous books including The Party's Over: Oil, War and the Fate of Industrial Societies (New Society, 2003) and Powerdown: Options and Actiosn for a Post-Carbon World (New Society, 2004).
He is a journalist, educator, editor, lecturer, and a Core Faculty member of New College of California, where he teaches courses on "Energy and Society" and "Culture, Ecology and Sustainable Community."
His monthly MuseLetter was nominated in 1994 by Utne Reader for an Alternative Press Award and has been included in Utne's annual list of Best Alternative Newsletters. His essays and articles have appeared in many journals including Z Magazine, The Futurist, Earth Island Journal, Wild Matters, Alternative Press Review, and The Sun.
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