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2009: Predictions for Australia

aeldric, The Oil Drum: ANZ
As we exit 2008 it seems like a worthwhile exercise to consider from an Australian perspective what happened and what might come next. My “predictions” for 2009 and beyond should be viewed as nothing more than “Food For Thought”. When I review my past predictions (going back to early 2005) I find that the events of 2008 occurred earlier and were more pronounced than I predicted – So I don’t recommend betting money on this crop of forecasts!

I will use these predictions to define my actions over the next 12 months, so your views are welcome!

… The big picture:-
As I (and most of you) have said many times over recent years, the big picture problem is that the emerging economic downturn will complicate the response to Peak Oil and Climate Change. A crashing economy looks likely to force us down the easier (but ultimately disastrous) energy paths (CTL, GTL, tar sands, shale oil, etc), rather than the harder (but safe and renewable) energy paths. The projects associated with “easier” paths may be economically more defensible, but they will lead to worsening CO2 levels.

In summary: Short term we have an economic crisis to deal with, mid-term we have an energy crisis, and in the decades ahead we need to prepare ourselves (and our children) for a climate crisis.

The situation as we exit 2008:-

Financial situation.
In 2008 the Dow Jones industrial average dropped about 4,500 points, or around 34%, its biggest loss since 1931. Blue chips like Citigroup and Alcoa lost more than 65% of their value. The broader Standard & Poor’s 500-stock index dropped 39.5%, almost exactly matching the decline in 1937. As many predicted (though 1 year ahead of my personal expected schedule), the US economy is in crisis. The Australian economy is generally following the US lead, but our resources are keeping us from suffering to the same extent.

So the economic crisis is emerging a little ahead of my expected schedule.


As we know, oil prices hit frightening heights with terrifying rapidity. Then they collapsed at an even more alarming rate. This drop in price has led to a decrease in new exploration and development projects (… ). The impacts of this will be felt in coming years.

The oil crisis emerged significantly ahead of my predicted schedule.
(6 January 2009)

Are we approaching peak coal?

Joseph Romm, Gristmill
U.S. coal supply may last only 10-20 years

Part 1

The imminent reality of peak oil production should be clear to all by now.

Now some very serious people are suggesting that there is a lot less accessible coal out there than most folks believe. If we are nearing peak coal (and peak oil), then we would need to embrace the rapid transition to a clean energy economy almost as urgently as we need to embrace it to avoid destroying the climate.

Let’s start with the U.S. Geological Survey’s stunning 131-page analysis from December, “Assessment of Coal Geology, Resources, and Reserves in the Gillette Coalfield, Powder River Basin, Wyoming” [big PDF]:

… Right now, I’m not certain there is enough hard data to draw a firm conclusion on this issue. Also, the amount of economically recoverable coal in this country and around the world clearly depends on the price of coal, which, until recently, had been soaring.

If the nations of the world get serious about avoiding catastrophic global warming, then we will either need to start reducing global coal-use pretty sharply starting around 2020 (if your target is 450 ppm) or immediately (if your target is 350 ppm). Such sharp reductions, which must begin before coal with carbon capture and storage (CCS) is likely to be practical and affordable on a large scale (see here), would inevitably lead to sharp declines in the price of coal.

Of course, if coal and oil are near peak production levels, then we urgently need to jumpstart the transition to a clean energy economy to replace those fossil fuels — almost as fast as that urgent transition is needed to avoid catastrophic climate impacts. And if coal is near peak production levels, then CCS is obviously a much less useful and scalable climate solution.
(7 January 2009)
Joseph Romm is one of the few climate writers who “gets” peak oil. His bio at Gristmill:

Joseph Romm is the editor of Climate Progress. Joe is a Senior Fellow at the Center for American Progress and was acting assistant secretary of energy for energy efficiency and renewable energy during the Clinton Administration

ASPO’s Aleklett: The year that passed and the year ahead

Kjell Aleklett, Aleklett’s Energy Mix
2007 will go down in history as an extreme year for the price of oil and also for the production of oil. Most people are only interested in the price. One year ago on 28 December oil was selling for US$89.76 per barrel. In January of this year it passed US$90 per barrel. The price rose through the first half of the year to the record level of US$147 in July. Many economists began to speculate about prices at US$200 per barrel. The reason for the price rise and the subsequent price crash will doubtless be analysed in numerous future theses. Some consider that it was China’s thirst for oil products before the Olympic Games that was the driving force when the price was rising while others assert that it was the collapse of banking and the private sector in the USA and the rest of the world that caused the price decline. At the moment the price is wandering around US40 per barrel and the question is if this is the price bottom.

In his address to the nation in 2006 President Bush said that, “America is addicted to oil”. If one is dependent on a drug one is willing to pay any price. One year ago there were few signs of breaking this dependence but if we study American oil consumption in detail we can see that, in fact, it had levelled off at that time. In contrast, global oil consumption continued to increase and it was during the fourth quarter of 2007 that the world experienced it greatest demand for oil at 86.94 million barrels per day (data from the US Energy Information Agency, EIA).

The figures supplied by the EIA give averages for four week intervals. According to these figures the USA consumed 21.80 mb/d at the end of February 2007 which is the highest average yet recorded. One year ago in December consumption was 21.23 mb/d but approximately nine months later on 10 October consumption had collapsed by 2.62 mb/d to 18.61 mb/d. This collapse in demand certainly contributed to the collapse in the price of oil by US$100 per barrel compared with the highest price in June. Now we see that consumption is slowly increasing again. It remains to be seen what this will mean for future oil prices. When talking about the price rise it was certainly not demand in the USA that drove it.

What will happen in oil year 2009? Let’s begin with the price. Just now on 29 December the price for oil to be delivered in February is US$40.18 per barrel. For delivery in April it is US$44.72. Towards summer in July the price has risen to $48.82, i.e. the price is expected to rise by 20%. Further into the future we see other prices but at the moment it looks as though we have reached the bottom of the oil price’s rollercoaster path. Compared with the price one year ago, the future prices are still very low. For us as consumers this is, naturally, an advantage but for those that wish to develop alternatives it is a nightmare.

The question is what this means for future production. The fluctuations that we now see in global demand are so small that they are only tiny fractions of the 31 billion barrels that we consume annually. This means that, every year we empty oil fields equivalent to all the oil that has ever been discovered in Norway. We know that today’s oil fields are old and that production is decreasing every year. If the oil industry does not make large investments then we cannot continue to produce 31 billion barrels of oil per year. It is expensive to develop new production and many of the big players report that they are postponing their investments.

The fact that we have an oversupply of oil through decreased demand and not because we have found new oil fields supports the argument for Peak Oil. The question is whether we really will expand production with expensive projects in the oil industry or whether we seize the opportunity to develop an alternative future – a future that we must, in any case, adapt to.
(8 January 2009)

Kjell Aleklett is president of ASPO International and an occasional contributor to Energy Bulletin. He is also Professor in Physics at the Department of Physics and Astronomy, Global Energy Systems Group (former Uppsala Hydrocarbon Depletion Study Group) at Uppsala University.

Kjell keeps a blog: Aleklett’s Energy Mix.