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The Big Thirst
Jad Mouawad, New York Times
Oil prices rose above $116 a barrel last week, setting another record for the world’s most indispensable energy commodity. What was striking about this latest milestone was what didn’t happen: there was no shortage of oil, no sudden embargo, no exporter turning off its spigot.
The weak dollar, worries about terrorism and speculation on commodity markets certainly played a role. But, of course, so did demand. Producers are struggling to pump as much as they can to quench the thirst not only of the developed world, but fast-growing developing nations like China and India, the two most populous countries. To many experts, the steadily rising price underscored longer-term fears about the future of a system that has supplied cheap oil for more than a century.
… Today’s tensions are only likely to get worse in coming years. Consider a few numbers: The planet’s population is expected to grow by 50 percent to nine billion by sometime in the middle of the century. The number of cars and trucks is projected to double in 30 years- to more than two billion – as developing nations rapidly modernize. And twice as many passenger jetliners, more than 36,000, will in all likelihood be crisscrossing the skies in 20 years.
… The problem is that no one can say for sure where all this oil is going to come from.
That might not sound like such a bad thing for those concerned about carbon emissions and climate change. High prices might end up forcing people to conserve and encourage the development of alternatives. But the energy crunch might also result in a global scramble for resources, energy wars, and much higher energy prices.
Some oil executives are sounding the alarm bell. At a recent energy conference, John Hess, the chief executive of Hess Corporation, the international oil company, warned that an oil crisis was looming if the world didn’t deal with runaway demand and strained supplies. The chief executive of Royal Dutch Shell, Jeroen van der Veer, said recently, with some understatement, that, “the energy outlook does not look rosy.”
For one thing, the world’s oil supplies are already stretched. Countries outside of the OPEC cartel – which have been the main source of new oil discoveries and production since the 1970s – have said they expect little to no growth this year in oil production.
… A small band of skeptics view today’s record prices as evidence that oil supplies have peaked – that half the globe’s oil supply has already been used up. But most experts believe that there are still enough oil reserves, both discovered and undiscovered, to last at least through the middle of the century.
The problem is that in many corners of the world, geopolitics, more than geology, has removed much of those reserves from the reach of independent oil companies.
(20 April 2008)
Contributor Jeffrey J. Brown writes:
Jad Mouawad is gradually changing his tone, but he still quotes ExxonMobil as saying that if they were in charge, everything would be fine, to which I always ask, “What about Texas and the North Sea?” Texas and the North Sea were developed by private companies, using the best available technology, with virtually no restrictions on drilling, resulting in respective decline rates of -4%/year and -4.5%year. If oil companies couldn’t reverse the long term declines in Texas and North Sea production, why would they be able to reverse declines anywhere in the world? There is a great deal of confusion about the difference between finding new fields and making a real difference. In post-peak regions we don’t stop finding oil, but we can’t offset the declines from the older, larger oil fields.
However, Mouawad did finish the article with this paragraph:
“The country has been living beyond its means,” said Vaclav Smil, a prominent energy expert at the University of Manitoba. “The situation is dire. We need to do relative sacrifices. But people don’t realize how dire the situation is.”
Contributor David MacLeod writes:
“We’re still waiting for NYT energy specialist Jad Mouawad to put his not inconsiderable abilities to work, and get serious about examining peak oil.” -BA (Energy Bulletin Apr 16)
Ask and ye shall receive. I guess you could call this the ‘peak oil lite’ position.
Good on Jad Mouawad for writing a comprehensive and balanced piece. It may be “peak oil lite,” but at least he’s writing with an open mind. Mouawad may want to re-consider his characterization of peak oil as “a small band of skeptics.” A recent poll showed that in 15 out of 16 countries, “an average of 70 percent takes the position that governments should assume that “oil is running out and it is necessary to make a major effort to replace oil as a primary source of energy.”
Running Out of Planet to Exploit
Paul Krugman, New York times
Nine years ago The Economist ran a big story on oil, which was then selling for $10 a barrel. The magazine warned that this might not last. Instead, it suggested, oil might well fall to $5 a barrel.
In any case, The Economist asserted, the world faced “the prospect of cheap, plentiful oil for the foreseeable future.”
Last week, oil hit $117.
It’s not just oil that has defied the complacency of a few years back. Food prices have also soared, as have the prices of basic metals. And the global surge in commodity prices is reviving a question we haven’t heard much since the 1970s: Will limited supplies of natural resources pose an obstacle to future world economic growth?
… Even if it turns out that we’re really at or near peak world oil production, that doesn’t mean that one day we’ll say, “Oh my God! We just ran out of oil!” and watch civilization collapse into “Mad Max” anarchy.
But rich countries will face steady pressure on their economies from rising resource prices, making it harder to raise their standard of living. And some poor countries will find themselves living dangerously close to the edge – or over it.
Don’t look now, but the good times may have just stopped rolling.
(21 April 2008)
Commodity prices: Deja vu all over again
(Paul Krugman is reading The Oil Drum)
This isn’t the first time we’ve had a simultaneous runup in the prices of oil, food, and many other commodities. The great commodity boom of 1972-75 was, if anything, bigger. And there are extraordinary parallels with current events: it was an energy crisis, but there was also a world food crisis, and prices of metals also soared.
… Right now, I’m feeling sympathetic to peak oil types. But are they the modern version of the Limits to Growth crowd? (I don’t think so — the peakers I read don’t suffer from the kind of uninformed intellectual arrogance that was behind the early-70s doomsaying.) Jim Hamilton and Jeff Frankel think it’s low real interest rates — but where are the big inventories?
It’s a puzzlement.
(19 April 2008)
BA: In his blog on the NY Times, economist Paul Krugman links to The Oil Drum, as an example of the peak oil types that he’s reading. Unfortunately, he also pushes the untruth about the “Limits to Growth” book being wrong or overblown. For details, see Ugo Bardi’s Cassandra’s curse: how “The Limits to Growth” was demonized, posted at The Oil Drum.
Contributor JMG wrote to Paul Krugman:
Funny how so many economists badmouth “Limits to Growth” and then you ask them and they’ve never read it; they’ve simply absorbed the infinite growth paradigm through their skins and sneer at anyone who suggests otherwise.
I don’t suspect that’s the case here, I have too much respect for PK, but I wonder why the charge of arrogance against them? What specifically qualifies Meadows et al. as arrogant?
Matt Simmons, perhaps the most important living peak oil Paul Revere, wrote a good article on revisiting limits to growth that more people should read. www.energybulletin.net/1512.html