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Running on empty? Fears over oil supply move into the mainstream
Carola Hoyos, Financial Times via Business Spectator
On a rainy day last month, four drummers, three guitarists, a bagpiper, two didgeridoo players and 186 others assembled in the rural English town of Cirencester to discuss turning their neighbourhoods into low-impact communities built around farming, arts and crafts and herbal medicine.
After communal meditation and a few speeches, those present gathered in small groups to discuss everything from transport without oil to engaging local politicians in the ‘Transition Towns’ movement’s stated aim: reducing their carbon footprint in response to concerns over diminishing hydrocarbon reserves as well as global warming.
… For years, such meetings have been dismissed as eccentric. Most of the world’s oil executives, government ministers, analysts and consultants reject the “peak oil” theory – the notion based on the 1950s work of Marion King Hubbert, a Shell geologist, that crude production will soon enter terminal decline. They say it understates remaining reserves, plays down the contribution of technological advances and ignores the role of market forces in shaping future supply.
But with the oil price at a record $126 a barrel, more than 1,000 per cent higher than a decade ago, fears of the end of the hydrocarbon age have seeped into the mainstream. Many in the industry itself now accept that supply constraints are shaping the price as much as rampant demand.
… So are the peak oilists right? A series of recent events certainly appears to lend credence to those who argue that the world’s ageing oilfields are being sucked dry amid China’s and India’s determination to lift themselves out of poverty and the west’s reluctance to give up the luxuries of modern oil-dependent life.
(20 May 2008)
Long article, mentioning several voices from the peak oil community. Suggested by Jerome of Paris.
Also posted at Business Spectator.
Jeffrey Brown’s Warning On Oil Producers’ Own Rising Consumption Gains New Wall Street Backing
Energy Tech Stocks
Texas-based independent petroleum geologist Jeffrey Brown has been warning the world for a while now that rapidly rising domestic consumption in oil-producing countries is limiting the amount of oil they have to export to the United States, China and other big oil-consuming nations.
EnergyTechStocks.com first wrote about Brown last summer. (See Prediction #1 (of 4) from Oil Geologist Jeffrey Brown: Producers’ Own Consumption Rising, Exports about to Plummet) Since then Jeff Rubin, chief economist at CIBC, has written his own report warning about oil producers’ growing call on their own oil. Now in a new report, James Barrineau, global economist at another Wall Street investment banking firm, Alliance Bernstein, has written, “In oil-exporting developing countries, strong economic growth fueled by oil revenues has begun to accelerate domestic consumption faster than production – a trend that seems to have gathered speed in the last two years.”
(19 May 2008)
Contributor Bill Paul writes:
Ex-Wall Street Journal reporter that I am, I’m fascinated by Wall Street’s growing acceptance of Jeffrey Brown’s work on ELM. Brown’s work definitely is starting to change how investors think.
Contributor Jeffrey Brown writes:
As usual, I should note that I was building on prior work by Simmons & Deffeyes, et al, based on
Samuel Foucher’s technical work.
What the Export Land Model Means for Energy Prices
David Galland, Casey Energy Speculator via FX Street
… Which brings me to the work being done by Jeffrey Brown, a professional geoscientist with an avid academic and professional interest in something called the Export Land Model.
… To understand the importance of exports when discussing peak oil, ask yourself the question, “What’s more important: the fact that global oil production is falling … or that the oil-exporting nations are cutting off their exports?”
While the two questions are clearly linked, it is the nuance of the export question that clearly matters the most. Especially if you live in a country such as the US, which currently imports about 70% of its oil.
Which brings us to the Export Land Model (or ELM, as I will refer to it from here). The basic thesis expressed by Jeff Brown and other students of the ELM is that, to fully appreciate the impact of peak oil, you cannot look only at the production declines so presciently anticipated by MK Hubbard in 1956. You also have to look at the rate of local consumption and the effect of that consumption on the ability of a country to export its oil.
… But here’s the thing. Using straightforward ELM calculations, Jeffrey Brown is confident that Mexico will ship its last barrel of oil to the United States — or anywhere else, for that matter — about 6 years from now, in 2014. In a recent interview with Brown, I asked about this forecast.
“Mexico was consuming half of their production at peak in 2004. And if you look at the ’05, ’06, ’07 data, they’re basically on track, on average, to approach zero net oil exports no later than 2014,” he confirmed.
Of course, the US is completely unprepared to replace this source of oil, especially considering the growing stresses on global oil supplies causing by ballooning demand from emerging markets. That means the international competition for available supplies is only going to get more desperate in the months and years ahead.
What will this mean to oil prices, according to Brown?
“From this point out I think we’ll see a geometric progression in prices … you know, $50, $100, $200, $400, whatever. The only question now is how short the periods will be between prices doubling again.”
(20 May 2008)
Has Peak Oil–As a Meme–“Tipped”? (Out of Futures Backwardation and into Contango)
Jeff Vail, Blog and The Oil Drum
Has Peak Oil, as a meme, “tipped”?
Our latest oil price poll suggests that well over 70% of the sample (N>3000 now) thinks that oil will at least stay above $114 a barrel for the next two months–and almost half think it will hit $140 a barrel in that timeframe.
Search volume on Google for the term is up dramatically in the past month, as is traffic at The Oil Drum.
One indicator of a “tipping point” for acceptance of Peak Oil may be the state of backwardation in oil futures. I first raised this idea over 2 years ago, but recent market movements, coinciding with attention in the press, may be validating it: when the markets accept Peak Oil, we will see the end of backwardation in crude oil markets, and possibly even Contango.
… A few quick definitions: Backwardation is when prices in the future are lower than in the present. Contago is the reverse, where future prices are higher than in the present.
Normally, oil markets are in backwardation. It is conventional wisdom that oil markets will always return to backwardation for several reasons:
(19 May 2008)
Supporting Jeff’s remarks, traffic at Energy Bulletin is up to about 38,000 page views per week day.
Also posted at The Oil Drum.
Matthew Knight, CNN
We rely on it to power our everyday lives, and it drives the economy worldwide, but oil faces an uncertain future in the 21st century. Black gold is increasingly expensive, environmentally damaging and, in the view of some experts, increasingly scarce.
… Will we ever run out of oil?
All of the world’s resources are finite so we will run out at some point. The big debate at the moment is about when oil production will peak — i.e. when half of oil stocks have been used and production begins to slow.
Texan born geophysicist Dr M. King Hubbert first came up with the peak oil theory — known as ‘Hubbert’s peak’ — in the 1950s, arguing that U.S. oil production would peak in the early 1970s. He was right. And since 1981, the world has been using more oil than it has been finding.
So how much oil is left?
OPEC states that there were oil reserves of 1.1 trillion barrels in 2006, of which they control over three quarters. They predict that current stocks will last 81 years if consumption remained at 2006 levels — 76 million barrels per day (mb/d).
But according to Professor Kjell Aleklett of Association for the Study of Peak Oil&Gas (ASPO International) peak oil is going to happen a lot sooner.
(14 May 2008)
Destination Doha: The first debate
Hilary Whiteman, CNN
… none of this comes as a surprise to motorists who have had to dig deeper and deeper into their wallets to pay for a precious commodity whose current supply is being overwhelmed by increasing demand, regardless of whether production has peaked. Read more on the peak oil debate.
The question is where do we go from here? Far beyond the need to ease the pressure on consumers’ wallets, an answer must be found to stop the world gorging on fossil fuels when a renewable, greener, alternative can be found. We hope.
This week, the first of this year’s Principal Voices will meet in Doha, Qatar to discuss the “Economics of Energy.”
A key question they’ll be asking is whether it’s possible to reduce the world’s carbon footprint while continuing to feed our seemingly insatiable appetite for energy.
Alternative fuels could be the answer but so far none have proven to be a viable substitute for old-fashioned oil. So what is the solution? How do we balance saving the world with fueling its economy? Or do we need to step hard on the economic brakes for the greater good?
(19 May 2008)