A 'watershed month for the truth about peak oil'
Recent weeks have seen an explosion of information on peak oil – everywhere it seems except in the mainstream media. It may be in the business sections, but not the news pages.
Within the last two months, a variety of sources have come out with warnings about both the immediacy of peak oil and the implications of what happens when demand of such a vital resource becomes greater than supply. What’s more, these various an unconnected sources are presenting this as an immediate problem, something requiring urgent and large scale efforts in order to avoid possibly dire economic consequences. You don’t get a better definition of news than that (to which you could add the consideration that if news is anything someone doesn’t want you to know it doesn’t get bigger than this.) Just look at the recent peak oil publications and briefings:
In February, the UK Industry Task Force on Peak Oil and Energy Security issued a report predicting an “oil crunch” within five years. It was followed in mid-March by a behind-closed doors energy briefing called by the British government (which heard “2004 was . . . the beginning of the global production plateau for conventional oil.”)
March also saw a report from scientists in Kuwait predicting that world conventional crude oil production will peak in 2014. Around that time, researchers from Oxford University suggested that oil reserves have been over-estimated by up to one-third, and demand will likely outstrip supply as soon as 2014. In mid-March, French newspaper Le Monde stated that the Energy Information Agency was looking at oil production declining by 2011.
The month ended with a meeting of the world’s energy ministers from oil producing and consuming nations, the International Energy Forum. Despite a virtual media blackout about what took place at the meeting, papers listed on-line ahead of event forecast of global oil supplies “peaking between 2020-2025” with demand outstripping supply sometime ahead of this.
In April, the US Joint Forces command dropped a bombshell with its Joint Operating Environment report that the military should have contingency plans as surplus oil production capacity could disappear within two years and that there could be serious shortages by 2015. ("By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.")
Considering this information is timely, with wide-ranging results, and from highly placed sources – industry leaders, academics, scientists, government and the military – then why hasn’t there been more media coverage?
Chris Nelder, in his Seeking Alpha column Governments Starting to Worry About Peak Oil, suggests that “In my seasoned judgment, the American media blackout is deliberate.”
By any measure, March was a watershed month for the truth about peak oil.
Estimates on the timing of the peak have narrowed dramatically, and now center on the 2012-2015 time frame. The range of estimates on the peak rate of production remain a bit broader and shrouded in caveats, but they are rapidly drawing closer to 90 mbpd. And the globally averaged, post-peak annual decline rates are settling in around 2%.
In other words, industry and governments appear to be coming around to what my call has been all along: 2012, at 90 mbpd or less, then declining at about 2.5% per year.
Now we know that the oil and gas industry, as well as the world's governments, are not only aware of the peak oil threat... they too are deeply worried about it.
Worried enough to huddle behind closed doors, away from the press. Worried enough to formulate plans to control price volatility. Worried enough to agitate for more transparent data. Worried enough to begin planning for a future of relentlessly declining energy.
It is interesting to note that peak oil only gets news time on the business pages – which is what Seeking Alpha is. Often it’s hidden in business-speak, but it’s there, if you look hard enough.
For instance, an essay earlier in the month on Forbes titled Oil Reality Check: It's Going Higher suggests we will see oil above “the magic $100 number” this year, due to simple market forces – rising demand. Writer Mark Mills states:
Whatever the debate about the ultimate total physical hydrocarbon resources on this planet, using technology we have, equipment and infrastructure that exists or could be built under any scenario in a few years, 2010 probably marks "the peak" production of oil as we know it today. You don't have to be an economist or pundit to know the implications of demand continuing to grow against an essentially fixed supply base.
He notes that discussion, post-peak, will not be about best alternatives to oil, such as biofuels and synfuels, because all possible alternatives will need to be pressed into use. Not that he sees these as offering salvation, as “vehicle fleets take time to turn over, and we already use one-third of our corn crop to make biofuel that supplies only a few percent of U.S. transportation needs.”
Then things take an apocalyptic turn:
With no short-term salvation derived from a dramatic growth in oil production, then all the world has to do to avoid the next oil price apocalypse is cut demand, or find alternatives.
Cut demand? We did that experiment. It's called a recession. The only other short-term fixes are all behavioral, few of them pleasant. President Nixon tried that with the infamously unpopular and wildly ignored imposition of a national 55 m.p.h. speed limit.
Absent a nuclear war, a pandemic or another Great Recession, there's little that can be done about the near future demand-supply balance. Demand is going back up faster than supply.
The best solution he can find to keep America safe from such expensive oil “will be a growing economy rendering energy costs in general, a declining share of GDP.” Quite how to make the economy boom at a time of spiraling energy costs is not suggested, of course.
What do you think? Leave a comment below.
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