Peak oil – June 4

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Seven Questions: The New World Energy Order (Fatih Birol interview)
Foreign Policy
Why are oil prices soaring so high, and will they ever return to Earth? Fatih Birol, chief economist at the International Energy Agency in Paris, explains why peak oil is real, why biofuels are indispensable, and how China determines what you pay at the pump.
—
Foreign Policy: The Wall Street Journal recently reported that your agency is preparing to revise its estimate of future oil supplies. Can you tell us a little bit about your preliminary findings?

Fatih Birol: … We are going to publish our study on the 12th of November, so I don’t know the results yet. What I can tell you is that what we are experiencing in the last few years—high prices, lack of investment in many areas, and the significant decline rates, especially in the North Sea, Gulf of Mexico, and elsewhere—will be considered.

We are entering a new world energy order. Today, demand for oil is dominated by China, India, and even by the Middle East countries themselves. The main actors of the recent past—namely the OECD countries, rich countries, the United States, Europe, Japan—their time is passé. It’s over.

… FP: Do you believe in peak oil?

FB: Of course, but the question is when? Global oil resources are limited. We have conventional oil; we have unconventional oil. We have oil in the North Sea, in the Gulf of Mexico. We have more oil in the OPEC countries. What I can tell you is that one day global conventional oil will peak. This will depend on many factors, including the role of technology, investment, and production policies. When we look at oil outside of the OPEC countries, when you put all of them together, I think it is going to peak very soon. But we have unconventional oil, and we have oil in the Middle East as well. How much will come to the market from unconventional oil?

… FP: How much of the current oil price is explained by financial speculation? Is there an “oil bubble,” as George Soros and others are claiming?

FB: There is definitely financial speculation, but the main reason for the high prices is the growing perception in the markets that the future demand growth may not be met by the supply growth. This provides fertile ground for speculators, and they play a triggering role in increasing prices.

Fatih Birol is chief economist at the International Energy Agency.
(4 June 2008)

The Month of the Psychological Shock (Over Oil) in America?
Luis de Sousa, European Tribune
In a country largely turned into itself, a lone journalist tries to bring reality on oil prices above the daily roll of news bits on football results, jet-set gossip and political fait-divers.

On the 24th of May Jorge Nascimento Rodrigues published on the newspaper Expresso (the largest weekly publication in Portugal with 120 000 printings) what is one of the most direct addresses of Peak Oil ever featured in Portuguese media. Apparently written about the US this article is replete with messages for internal consumption.

English translation
The month of the psychological shock in America

Three facts gave the first shake up on the American citizen: the price of a gallon of gasoline, a dramatic documentary on CNN and a warning on a report that will come out only in November.

The month of May of 2008 will remain in the history of the common American citizen has the moment of the psychological shock. Finally, the American in the street has perceived – at the filling station, on the couch in front of the TV and in the first page of his most important newspaper – that the age of cheap oil is really over.
(4 June 2008)
The article from Expresso is given in side-by-side Portuguese and English versions. De Sousa’s post is also on The Oil Drum: Europe, but the formatting there is not very good – at least on my browser (Firefox).

Dallas vs. Indonesia
Julian Murdoch, Hard Assets Investor
As a relatively simple person, I tend to think of things in pure supply-and-demand terms, so for my tea leaves, I love charts like this one from the recent Dallas Fed prognostications. They put out a chart which, even if wrong, fills me with chart-porn simplistic glee:

[CHART of oil supply/demand curves]

Charts like this are just gorgeous in the depth of information that they project with so little ink. Whether the curves are correct or not, the important things are:

* The demand curve has shifted to the right
* The supply curve has shifted to the left

This is the textbook scenario for higher sustained prices. If you believe the basic premises behind the curves, $100 oil means either:

* Supply is completely constrained – not a curve, but a vertical line
* Demand is much more inelastic – more vertical, less curved

They go on to suggest four scenarios; two of which will drive prices higher, and two of which will push oil back under the magic $100 mark:

… Indonesia is kind of the poster child for how crazy all four of the Dallas Fed’s drivers are when faced with the real world. Last week, Indonesia pulled out of OPEC for the simple reason that they could longer hold up their part of the E – exports.
(2 June 2008)
Also at Seeking Alpha.

Hollow victory
Katherine Heerbrandt, Frederick News-Post
Rep. Roscoe Bartlett’s been proselytizing about peak oil from the House floor to the White House for years. He told us that America was in trouble by producing so much less oil than we consume. He warned of dependence on foreign oil and urged a national commitment to a smart energy policy — or else.

The “or else,” of course, being what’s happening now. Truckers are out of work and more unemployed are on the way as the cost of fuel hits a staggering all-time high. We feel the pain when we swipe our bank card, open a bill or buy food.

In 2005, borrowing from Richard Nixon, Bartlett said “America needs a national energy policy and a program on a scale of the Manhattan Project … to prevent or mitigate the consequences of global peak oil. Doing nothing or doing too little too late will lead to a global economic and geopolitical tsunami with potentially devastating ramifications.”

Let that bit of news sink in for a bit.

Bartlett was so singularly focused, he declined to talk about transportation at last year’s transportation summit spearheaded by Commissioner Charles Jenkins and Alderman Paul Smith. Instead, he offered to talk about peak oil. His wanted to put the traffic woes into a larger perspective.

Confronted with congestion on Frederick’s roads and an increasingly irate constituency, local leaders were less than impressed with talk about the impending fuel crisis.

It’s one of government’s most debilitating aspects: Too many fires to put out, too little time to think ahead to cast eyes into the future and plan accordingly.

And so it was for Bartlett, who tried and failed to capture even the limited imagination of a self-absorbed administration and Congress.

Bartlett has received scant praise in this column, and has been taken to task for his positions on Iraq, health care and mothers and veterans — to name a few. But his perseverance on the subject of peak oil, and the grim consequences facing our nation if we continued to ignore it, is worthy of praise.

Especially now that his dire predictions ring so ominously true.

Challenger Jennifer Dougherty scoffed at the suggestion the incumbent had something right. Sure he’s talked about it, but what’s he done about it?

Good question with reasonable explanations: For all his expertise and knowledge, he might as well have been the ragged guy playing guitar on Market and Church streets. No one listened. He enlisted few allies from his own party and his floor speeches were getting monotonous.

So Bartlett focused on spreading the message elsewhere. He sponsored groups, conferences, seminars; appeared on radio and television programs; and met with any interested journalist who called on the subject. But that’s taking too long.

In the end was he unsuccessful in garnering large-scale support because people were preoccupied with the war and the illegal immigrant debate, taxes and traffic jams? Was it because his position on energy was too progressive and attracted the endorsements of liberal activists and like-minded citizens?

Or did he just not have the leadership or charisma to sell it?

All of the above and more.

But it only matters if there’s any lesson learned. While Bartlett’s vindicated, it’s a hollow victory. We’re approaching a crisis he predicted, a crisis that might have been circumvented if, as a nation, we’d paid attention.
(4 June 2008)
Rather shabby treatment of Rep. Bartlett. As a lifelong Democrat I’m ashamed of this response by his Democratic challenger Jennifer Dougherty and columnist Heerbrandt. Rep. Bartlett reached out in an extraordinarily non-partisan way on energy. He repeatedly laid out the issues when it was not popular to do so.

If one does not support Rep. Bartlett’s conservative stances on other issues, fine. But where he has performed an extraordinary service, it is churlish and intellectually dishonest not to recognize it. Heerbrandt’s grudging approval is not enough.
-BA (no connection to Bartlett)