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Feeling a Bit Peaked

Paul Krugman, New York Times
Peak oil, that is – a dismal theory that keeps getting more plausible. Real oil prices in Feb. 2008 dollars:

[Graph: Price of oil from 1946-present]

A curious fact: a couple of years ago the firmly held belief of many right-wing economic commentators (why is this ideological? I’m not sure, but it was) was that the spectacular rise in home prices wasn’t a bubble, but that the rise in oil prices was.
(19 February 2008)
(UPDATE Feb 21) Contributor William Tamblyn points out an addition by Krugman:

Commenter Gufblog asks, “Isn’t it true that at above $40 a barrel Venezuela and Canada can start profitably turning oil sands and other hard-to-get-at sources into petroleum (which together more than double the world’s total supply and elevate Venezuela to the nation holding the greatest reserves)?” Well, people say that — but they’re always saying something like that. My first serious economics work was during the first oil crisis, when I spent many hours with Bureau of Mines publications containing firm estimates of the price of shale oil and oil-from-coal, all of which said that huge alternative supplies should be arriving any day now. Eventually people began talking about “Weitzmann’s Law,” which was that the cost of alternatives to conventional crude is 40% above the current price — whatever the current price is. Seriously, don’t believe the hype: history says that these things always fall short of expectations.

Revinventing the Way We Live: Interview with Ray McCormack

Ellise Fuchs, Pop Matters
It’s one thing to eat poorly or smoke cigarettes and know that somewhere down the line, you may pay for your individual behavior with poor health. But it’s quite another thing to participate in the destruction of a planet.

The documentary, A Crude Awakening, presents the theory of “peak oil,” namely, that because all crude oil sources on the planet have already been found, nonrenewable fossil fuel’s production will eventually enter a terminal decline. Whether you understand this peak to be approaching or already reached, the scenario is dire, given global oil consumption rates.

Co-directors Basil Gelpke and Ray McCormack’s well-researched and eloquent film doesn’t let anyone off the hook, no matter the size of your “environmental footprint.” The Swiss production has collected numerous awards along its festival route. McCormack brought the documentary to Torino last fall for the 10th edition of Cinemambiente. He spoke openly and passionately about the reality of the peak and making his important film.

Pop Matters: There was humor throughout the film. I remember looking around the theater and seeing these horrified faces, even as I really laughed at certain points.

McCormack: Yes, there was a very conscious effort to sweeten the pill a little bit, because some of the conclusions that we reached are quite serious and quite heavy. I think you need to give people a little break before you introduce the next heavy idea.

Pop Matters: The interviewees aren’t all the typical green or left-leaning types, including a Republican Congressman and former Bush advisor. Did you have any trouble finding people willing to be interviewed?

McCormack: Very few people didn’t want to speak. There were a couple of people in oil companies or who run foundations that support the production of oil. They never said they didn’t want to be in the film but we couldn’t quite get them to commit.

But to a large degree, the people in the film kind of selected themselves, because they had written books on the issues. It could be partly because Basil is Swiss and he has a very serious journalistic reputation and many years of experience in the field, so that people trusted him to do a fair job.

Another thing is that the message is more convincing if you have a variety of interview subjects. I would guess that, with the exception of maybe one or two people interviewed, the rest were to the right of the political spectrum. They could be considered conservatives with a small “c.”

I also think that when you have such people telling you this message, that we do have a problem and that our dependency on oil is problematic, since the production is going to decline, that it is very effective. You wouldn’t really expect the heads of Greenpeace, WWF or environmental activists to say anything else. But when you hear it from an ex-CIA man, the ex-General Secretary of OPEC or an energy investment banker who has been and continues to advise within the U.S. government, then it’s all the more convincing.

Pop Matters: I appreciated what you said at the screening regarding re-localization and the efforts small communities are making.

McCormack: Re-localization is sort of the mantra at this point. If you look at the kind of lifestyle that we lead, certainly in Europe, America, and the more industrialized countries, our supply lines are now so long. Almost everything that is manufactured or that we consume or buy in Europe and America comes from China. We’re very vulnerable if these supply lines somehow get broken. And we’ve lost a lot of the skills that we had 50 years ago which made us resilient as communities or as cities or towns and villages. People say that we can’t go back and it’s probably true, but we have to revert to being more independent and resilient as communities, towns, and cities.

I’ll give you an example. In 2005, there was a tax increase on diesel fuel in the UK which affected the truck drivers’ organization and their independent owners and operators of these big trucks that move everything around Britain. They blockaded the fuel depots. In three days, the supermarket shelves were empty. And there were people siphoning fuel from hospital workers’, doctors’, and nurses’ cars.

It goes to show that we are so vulnerable and so dependent on fuel that if we don’t become more independent at a local level, at a community level, at a city and country level, then we’re really going to be in trouble. I don’t think it means going back to the lives we had 50 or a hundred years ago, when people hardly ever moved outside their villages. But we certainly are going to have to reinvent the way in which we live.

Building local resilience and a sense of independence where you know that you can feed yourselves and you know that you can transport yourselves and you have your health system which is locally based: I think we must localize these services in order to survive.
(20 February 2008)

Oil Price Closed Above $100 a Barrel; World Leaders Ignore this Signal of Impending Shortages

Press release, The Oil Drum
The price for West Texas Intermediate (WTI) oil closed above $100 for the first time on February 19, 2008. “Rising oil prices have been giving a clear signal of pending shortages for over five years now,” according to By ignoring this signal, world leaders are steering the world toward an energy disaster characterized by shortages, high energy prices, inflation, civil unrest and famine.

The $100 a barrel closing price is a sign that times will never be the same again. “The world is entering a new era. In this new era, the supply of energy will dominate the political landscape in a way that is not being recognized by any of the presidential candidates,” according to

In past years, newspapers and magazines have assured citizens that there is no problem with future oil supply. Articles have suggested that oil prices will be lower in the future; they may even collapse due to excess supply.

Recently, published articles have added some caveats. There is a need for increased investment, both for exploration and for improved production technologies. The media doesn’t mention that rates of return on the new investments are likely to be very low. At some point, it will become economically unattractive to keep searching for very small quantities of oil and gas that are expensive to extract.

The problem that oil companies are encountering is that there is a finite number of oil reservoirs, and many of these have been producing for over fifty years. In time, a large part of the oil that was originally in place has been removed. The oil that comes out now, comes out slowly, and is often mixed a high proportion of water.

In order to keep production up, additional wells are drilled into the reservoir. At some point, the strategy of adding more wells to keep production up ceases to work. Oil production from a long -produced field begins to decline, no matter how many new wells are drilled.
(20 February 2008)
UPDATE (Feb 21): The Oil Drum has posted the release on their site.

Exxon struggling to replace reserves, analyst says

Steve Goldstein, MarketWatch
Exxon Mobil Corp. is struggling to replace reserves and may have to boost capital spending substantially, an analyst said on Monday.

The world’s largest oil producer said on Friday afternoon that it unearthed proved reserves of 1.2 billion barrels of oil equivalent during 2007, or 76% of production.
Excluding the appropriation of Venezuela assets, which knocked reserves by around 500 million barrels, and its proved reserve replacement ratio would have been 107%.

Using a method of measurement that the Securities and Exchange Commission doesn’t recognize, but that oil firms use to make investment decisions, and Exxon Mobil’s reserve replacement ratio excluding Venezuela would have been 132%.

Exxon’s reserve replacement “is not a good result given the increases in expenditure that the oil companies are putting through,” said Peter Hitchens, an oil analyst at the U.K. brokerage Seymour Pierce.
(18 February 2008)

Peak Oil Is Here: How Will Young People Deal With The Next “Great Depression”?

Randy White, Lawns to Gardens
… Since the new Depression is most definitely here, and it is only going to get worse before things get better, how are young people reacting?

iDepressed Young people do not have to be defined by their age. Normally, youth is associated with inexperience and naivety, which is why they are often discredited by the more entrenched, ‘experienced’ adults, right?

But what happens when that experience turns obsolescence, and the adults themselves have attention deficit disorders? To me, it would imply that they are losing control and don’t know how to solve their problems.

The most amazing thing happened the other day. I was home and there was a knock at the door. Two young giggling women opened their introduction with: “Hi. We’re a little short on Rent this month, and were wondering if you had any soda cans you might want to donate?”.

I must be turning into a bit of a scrooge, because while I invited them to go through my recycling containers, I certainly wasn’t about to give them money. Not after they showed up on my front porch with their cell phones in hand.

So it makes me wonder – just how are clueless dolts in America going to handle the severe lifestyle changes that are coming? Many people have never dealt with Trauma, choosing rather to tune out into whatever entertainment experiences have kept them distracted from dealing with pain. It’s always the easy way out, trying to take pills to mask symptoms rather than getting in shape.

Only something is different now, isn’t it? It sure is getting harder to live the same way, isn’t it? But, “like, everything’s gonna be all right though, won’t it dude? Won’t we be able to keep dancing like they do in those TV commercials, and keep buying all the neat products and services they tell me to purchase? If only I could afford it.”
(19 February 2008)
Contributor Randy White writes:
Even my oil industry friends are beginning to concede that peakniks are correct and it is time for action and swift change in America.

Future Oil Wars Made Fun
Oil Wars Overtake the World in Video Game That Jumps Off Current Concerns

Alice Gomstyn, ABC News
Sometime in the near future, gas will cost about $20 a gallon.

It gets worse: China and Russia will form a military alliance that threatens the security of the United States and Europe.

Amid hunger, water scarcity and power outages, the two sides will go to war. Soldiers will descend upon bombed-out cities and abandoned villages, where rusting appliances and old car engines litter the streets.

But don’t let that get you down.

“What you’re trying to deliver in the game is fun,” said Luis Cataldi. “We don’t want someone to come in and become depressed.”

Cataldi, an art director at New York-based KAOS Studios, is one of dozens of minds behind the dystopian vision presented in Frontlines: Fuel of War, a new video game inspired in part by contemporary fears about oil, war and, yes, war over oil.

… [Cataldi] spoke breathlessly of oil’s role in World Wars I and II, of the Peak Oil theory – the idea that the world’s oil production is on the brink of falling – and of reported military exercises between China and Russia aimed at protecting their oil interests.

… To devise the game’s geopolitical context, he said, developers “read everything we could get our hands on.”

That included the books “The Party’s Over: Oil, War and the Fate of Industrial Societies,” by Richard Heinberg, and “Resource Wars: The New Landscape of Global Conflict,” by Michael Klare.

Heinberg, a senior fellow at the California-based Post Carbon Institute, was surprised but pleased to learn that his book helped to inspire a video game.

“I think anything that helps people understand the situation that we’re facing is, in general, good,” he said. “My hope would be that people who play the game then take the time and trouble to actually research some of these issues and look both into the science of oil depletion and the implications for our economy and our future.”

Klare, a professor at Hampshire College in Massachusetts, called the prospect of a world war over oil “very plausible” and said he saw potential for the game to raise awareness of the issue among young people.

“If you want to have an impact on young people on important issues, it’s important to reach them outside the classroom as well as inside the classroom,” he said, “Therefore entertainment has to be part of the mix.”

…But Maroney, 36, a Jacksonville, Fla. man who has played preview versions of the game, said that he doubted those details would stir any political sentiment among gamers.

“When the fight’s on, obviously everything else loses focus and you focus on keeping yourself alive,” he said.

Maroney said that the game has raised his awareness of oil issues. Still, he said, games are generally an “escape” for players.
(20 February 2008)
From what I’ve seen, the game is mostly a shoot-em-up and the educational content is minimal. -BA