The week peak oil went mainstream - July 15
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Former UK Times Editor: Are these the last days of the Oil Age?
William Rees-Mogg, Times
Oil ruled the 20th century; the shortage of oil will rule the 21st. There is now no doubt about the rising trend in oil prices. In 2003 a barrel of Brent crude sold for $29; in 2004 it rose to $38; in 2005 it rose to $54.50; in 2006 it rose to $65. Last Friday the price closed at $77.50. Some dealers expect it to test the $80 level quite shortly.
Last Tuesday the lead story in The Financial Times was the latest report from the International Energy Agency. The FT quoted the IEA as saying: "Oil looks extremely tight in five years' time," and that there are "prospects of even tighter natural gas markets at the turn of the decade". For an international agency, that is inflammatory language.
...This has revived the "oil peak" debate among oil analysts. Some analysts believe that the world will never again be able to pump as much oil as we are pumping at present.
...The oil peak debate can be left to the oil analysts. It is a complex issue, and there are some grounds for questioning the most pessimistic forecasts, including the likely development of the Canadian tar sands, and the success of American enhanced oil recovery techniques. Past forecasts of oil depletion have often proved wrong, and the present forecasts are uncertain.
...Those of us who remember the 1970s and early 1980s know how damaging the oil shocks were. They postponed the economic hopes of more than a decade, from 1974 to 1985. The rise of the oil price led to global inflation; at one point, around 1980, it looked as though global inflation could tip over into global hyper-inflation.
In the democracies, governments lost elections; in the Soviet Union, their regime was rocked. If governments found things very difficult, so did private individuals. Unemployment rose and the trade unions became very militant.
...Most people became poorer, except for those with access to oil money, but some became much poorer, much more quickly. Life became more of a gamble and societies became less stable. All this happened at a time when the supply of oil was being artificially restricted by the Opec oil cartel. There was no absolute shortage of oil, though analysts already knew that the oil peak would happen eventually. Now the situation has moved from a political problem, open to political settlement, to an absolute geological shortage. For the future, oil supply will be a zero-sum game. Some nations will be "haves" but others will be "have nots".
The shortage of oil and natural gas, relative to demand, had already changed the balance of world power. Historians may well conclude that the US decision to invade Iraq was primarily motivated by the desire to gain physical control of Iraq's oil and to provide defence support to other Middle Eastern oil powers. Political motivations are always mixed, but oil is an essential national interest of the United States. If the US is now deciding to withdraw from Iraq, the price will have to be paid in terms of loss of access to oil.
...The world is coming to the end of the age of oil, which produced its own technology, its balance of power, its own economy, its pattern of society. It does not greatly matter whether the oil supply has peaked already or is going to peak in five or 12 years' time. There is a huge adjustment to be made. There will be some benefits, including higher efficiencies and perhaps a better approach to global warming. But nothing will take us back towards the innocent expectation of indefinite expansion of the first months of the new millennium.
William Rees-Mogg has had a distinguished career with The Times and The Sunday Times. He was Deputy Editor of The Sunday Times before becoming Editor of The Times in 1967, a position he held until 1981. He was made a life peer in 1988. Since 1992 he has been a columnist for The Times, writing on a variety of issues. He has also been chairman of the Broadcast Standards Council and British Arts Council
(16 July 2007)
As David Strahan (author of "The Last Oil Shock") wrote in an email message:
I thought you might like to mark this week in your diary as the week when peak oil went mainstream.
China booms ... we pay the price
Selwyn Parker, Sunday Herald (Scotland)
ALL OF those cheaply produced goods from China-everything fromNikerunning shoes to electric kettles - are coming home to roostrightherein Britain. As factories multiply there to satisfy the Western world's insatiable demand for consumer goods, they use ever-increasing volumes of fuel.
The result is a coming oil crunch that will force up the price of fuel for cars, trains and planes, for home heating, for our own (diminishing) stock of factories and even the cost of money in the form of interest rates.
Judging by the latest figures from a variety of sources, those who think a quid a gallon at the pump makes motoring more of a luxury than a necessity ain't seen nothing yet.
The industrialised countries' energy watchdog,the International Energy Agency, delivered a blunt warning last week of a global shortage of oil within five years that will push prices to record levels and in the process render the West even more dependent on oil cartel Opec.
According to the IEA, which has a reputation for painstaking objectivity, "oil looks extremely tight in five years' time" with strong prospects of "even tighter natural gas markets" emerging even sooner, probably by 2010.
Right on cue, commodities indices promptly rose sharply this past week to year-high levels and crude oil prices hit an 11-month peak, with the benchmark Brent closing at US$76.86 a barrel, up over cents.
...prices for practically everything requiring fossil fuels in its production will rise. And indirect taxes will rise with it.
The whole world is vulnerable to oil prices. Developed economies depend on a regular and affordable supply of it. "Although most oil-importing economies around the world have continued to grow strongly since 2002, they would have grown even more rapidly had the price of oil and other forms of energy not increased," the IEA points out.
And impoverished nations, struggling to compete in world markets, will suffer more those in the West from the coming crunch. "An oil-price shock caused by a sudden and severe supply disruption would be particularly damaging - for heavily indebted poor countries most of all," the IEA explains.
...We have heard doom-laden scenarios before but this time Opec, even though it puts the case differently, seems to agree. The oil cartel's own formidable team of analysts and consultants, who look at everything from the increase in the working population of China to predicted global levels of car ownership, have consulted the crystal ball as far ahead as 2030. They have concluded that requirements will increase significantly faster than the rate of supply: "Oil demand is set to rise from the 2005 level of 83 million barrels a day to 118 million barrels a day over the next 23 years."
...If the coming oil crunch is no worse than forecast, Britain and Europe should be able to surmount it, albeit at a considerable cost in terms of the average person's purse, industrial profits and ease of transport among other after-effects. It is unlikely we will have to revert to pre-industrial lifestyles when households used traditional biomass - wood, lumps of charcoal, straw and even animal dung for energy consumption. That, however, is the fate of at least 2.5 billion people around the world who still use these fuels for cooking and heating, and will continue to do so by 2030.
(15 July 2007)
The Herald also published a related letter from Alastair Harper, House of Gask, Lathalmond, by Dunfermline:
While warning signs are appearing of associated crises in the rapidly rising Third World populations and the rising prices for diminishing world resources of food and raw materials, the International Energy Authority has belatedly accepted the reality of peak oil and the fearful impact this will have on the future of the world.
The devastating nature of this issue is that humanity has used up half of the world's oil reserves, with the remaining half overwhelmingly lower in quality and in less accessible fields.
...The cheap energy era is over. The scarcity of one commodity will beget another and the inevitable price rises on human necessities will impinge on the world's poorest, making food so scarce as to reduce the rate of human population growth.
The fatal consequence for the west is that a starving Third World will not submissively accept its fate but, rallying behind a militant leadership, will storm the citadels of the possessor nations. It has not escaped the notice of many that this inevitable process is under way.
Kenneth S. Deffeyes, The View from Hubbert's Peak
The impending doom and gloom from the world oil peak is ominous. There has been so little preparation and yet, if I am correct, the peak is upon us. We're feeling it now. The US government tried to cushion the bad news by introducing a "core inflation rate" which excludes energy and food. Word is getting around. The July 2, 2007 cover of the New Yorker shows the Statue of Liberty holding up a torch consisting of a fluorescent light bulb. It looks as if we will go through another US presidential election with no candidate calling attention to the world oil problem, or to the North American natural gas problem. My only hope is that a candidate, who learns from private polls that he or she is behind, will drop the oil bomb into the debate.
Let's talk about money. What can individuals do even when their government tries to ignore the problem? Knowing that the oil peak is happening is almost like insider information.
(12 July 2007)
Blood for oil
Lyn Allison, On Line Opinion (Australia)
Brendan Nelson's admission that Australia has to help secure oil supplies at least brings some honesty into the rhetoric about our ongoing military involvement in Iraq. However, it also reveals a dangerous and blinkered vision of how the oil have-nots expect to secure preferential treatment from the oil haves when the peak oil crunch finally comes.
Occupying Iraq to secure for the international oil giants unfettered access to its oil reserves is no doubt intended to keep prices down and secure supplies for the coalition of the willing. However, judging by the public outcry in Iraq against the Hydrocarbon Law the US insists must be passed by the Iraq parliament, stability in the Middle East is unlikely to be the outcome.
It also suggests "energy security", so delivered, will allow us to avoid the reality that demand worldwide for oil will exceed production sometime over the next 10 years. Encouraged by the oil companies, the government is a peak oil sceptic and sees no need to safeguard the economy by developing alternatives to oil.
...For Australia to continue on this path of basing our economy on foreign owned oil is a failure in logic and is making a noose for ourselves. Energy security must be domestically produced, controlled and sustainable.
Our economy is already too vulnerable due to our dependence on oil.
We are seeing the effect the cost of petrol is having on householders already vulnerable from high levels of debt and mortgages. Action must be early, because early action is the most cost effective and cheapest action. We must not miss the opportunity like we did after the first gulf war.
We must use this time, this event to invest in public transport, in fuel efficient vehicles, to reduce the country on our car dependence and at the same time we must be developing domestically produced and controlled alternative fuels.
(12 July 2007)
Contributor SM writes:
Lyn Allison is a senator for Victoria and leader of the Australian Democrats.
If you're in a hole, merge. But is it too late for BP and Shell?
David Strahan, Independent
With reserves running dry in non-Opec countries, rumours of a marriage could finally come true. Even a combined group, though, might struggle in its quest for more black gold. reports
BP and Shell are finally set to merge. That's if you believe the tittle-tattle in the Square Mile.
Of course rumours that the energy giants might unite are hardly new and have been the stuff of bankers' fevered imaginations for years. But there is now an increasingly compelling case for the two to integrate.
At 4.5 million barrels per day, the oil output of a combined Shell-BP would dwarf that of American behemoth ExxonMobil and even major oil-producing countries such as Iran. Some analysts make a positive case for such a merger on the basis of massive economies of scale, claiming it could save $5bn (Â£2.5bn). But if and when it happens, the real motivation will be far darker: desperation.
...Shell and BP's troubles are neither unusual nor surprising, but they are exacerbated by these groups being some of the biggest fish in a shrinking pond. The fact is they are substantially excluded from Opec countries, which control 75 per cent of the world's proven reserves. And their plight is worsening as resource nationalism takes hold from Russia - where Gazprom has just wrested control of both Shell's Sakhalin II project and BP's Kovykta field - to Venezuela, where international oil interests have simply been expropriated.
So the supermajors - ExxonMobil, Chevron, Shell, BP and Total - are largely restricted to operating in non-Opec countries where oil production is generally already in decline.
David Strahan is the author of 'The Last Oil Shock: a survival guide to the imminent extinction of petroleum man' (John Murray, Â£12.99
(15 July 2007)
Chris Skrewbowski on the dramatic shortage of new LNG mega projects (text and audio)
Global Public Media
Petroleum Review (UK) editor Chris Skrebowski talks about the extraordinary findings in his latest report on liquid natural gas projects with GPM's Julian Darley.
LNG Mega Projects Report from the July 2007 issue of Petroleum Review:
LNG - few new projects and no project go-aheads
The LNG market currently presents users with a paradox. Demand is booming and rising numbers of countries are looking to LNG imports for increased security of supply and to cover emerging production shortfalls. Yet on the supply side virtually nothing has changed from a year ago in terms of plans for new liquefaction capacity, writes Chris Skrebowski.
(14 July 2007)
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