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Geopolitical Disruptions #1: Theory of Disruptions to Oil & Resource Supply
Jeff Vail, The Oil Drum
The peak and gradual decline in world oil production is beginning to spawn a set of geopolitical positive-feedback-loops that seem likely to exacerbate depletion and accelerate the effective rate of decline of world oil production. Rather than isolated incidents, these geopolitical feedback loops are the direct result of geological peaking in oil production. Unlike geologically driven peaking, however, the effective rate of decline caused by geopolitical feedback loops has the potential to continually accelerate. This post will lay out a theory to better understand the impact of this system of geopolitical phenomena.
… 1. Are Geology and Geopolitics Separate?
When considering peak oil, it is tempting to look at the issue as a purely a matter of depletion due to geology and production economics. While peak oil certainly begins with the study and understanding of geological depletion, it spawns a set of exacerbating geopolitical factors that are critical to understanding the ultimate scope and impact of peak oil.
Some commentators consider “above ground factors” to be separate, stand-alone phenomena that are neither related to nor driven by the geological peaking of oil production. This is a critical mistake. Rather than being merely isolated phenomena, these geopolitical forces are best viewed as phenomena that would not exist but for geological constraints. Without geological constraints on oil production–specifically without geographical constraints on where remaining viable oil reserves are located–oil producers would produce sufficient oil from geopolitically stable locations. In reality, resources are almost always subject to uneven geographical distribution.
For economic and political reasons, consuming nations tend to produce domestic supplies first.
(14 August 2008)
Campaign 2008: Al Franken touts energy proposals
Brad Swenson Bemidji Pioneer (Minn)
Rural Minnesota can play a key role in an energy economy, providing needed jobs and cutting dependence on foreign oil, says Al Franken.
Franken, the DFL-endorsed candidate for U.S. Senate, completed Friday a two-day tour of northwestern Minnesota to tout his “Apollo Program” for renewable energy and energy efficiency.
… “I like the idea of domestic oil,” says Franken, a former “Saturday Night Live” writer and actor and satirist. “But we need to get off of this technology, because we know that we’ve either reached or about to reach peak oil.”
The United States has 3 percent of the world’s oil reserves, but the nation uses 25 percent of the supply. In addition to energy sources other than oil, Franken said an energy policy must include energy efficiency.
(16 August 2008)
California Attorney General Jerry Brown: Ignore peak oil and be caught with your pants down
Scott Sabatini, Legal Newsline
Brown calls California a model for energy efficiency; Calls for R&D tax breaks
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California Attorney General Jerry Brown told Legal Newsline he believes America needs an efficiency expert.
In a wide-ranging interview Friday, Brown said the United States must reduce its dependency on foreign oil, which would save billions of dollars through increasing energy efficiencies.
“There is massive gain to be realized from efficiency,” Brown said in between bites of a lunchtime sandwich on Friday, “but the federal government has been asleep. California has proven you can save billions of dollars. And it’s criminal they way the federal government has ignored its leadership in this area.”
… Alternative energy development has its place, Brown said, but the priority should be efficiency.
“The more humble opportunity is efficiency where you can get more savings,” Brown said. “We need to reduce foreign oil dependency right now.”
As for the cost of these programs, Brown said it’s a matter of re-allocating resources.
“How do we afford to buy the foreign oil?” he asked rhetorically. “The fact is we can’t afford not to. That is why efficiencies are critical.”
He said the federal government has failed to address these problems, choosing instead to ignore them. He added it is time for the country as a whole to start listening more. When asked how much stock he put into Peak Oil theories – a belief that the world has reached the peak of its oil production and will soon face severe shortages – Brown said it’s better to think ahead than remain skeptical.
“(Peak Oil) is certainly is a risk,” Brown said. “If you totally ignore it you’ll be caught with your pants down it will be pretty bad. So you have to pay attention. Oil is going to get harder to get and more expensive. That’s a fact.”
(16 August 2008)
Bull on Energy, A Bear on Nearly Everything Else: Eric Sprott
Barrons via Cattle Network
Interview with Eric Sprott, CEO, Sprott Asset Management
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Eric Sprott is a down to Earth — and controversial — kind of guy. Although the 63-year-old recently became a billionaire on paper with the initial public offering of Sprott Inc. (ticker: SII.T), the parent of his Sprott Asset Management firm, he’s not above drinking soup from a cup in his 27th-floor offices in Toronto’s financial district, rooms graced by a sizable collection of Canadian art, ancient money and medieval weaponry. Sprott, who started as an analyst at Merrill Lynch covering everything but commodities, has become known as a savvy natural-resources and energy investor — and he’s bearish on nearly everything else.
… Barron’s: You’re a believer in the peak-oil thesis, which says that global oil production has topped out. How much time do we have left before the supply dries up?
Sprott: We aren’t going to run out of oil in the next 100 years, but it will keep getting harder and more expensive to obtain. Most people don’t even realize that production is falling. In 1956, M. King Hubbert, an analyst at Shell Oil, said that production in the lower 48 states would go down by 1970. Sure enough, 14 years later, it started going down. And it’s kept sliding since then. We’ve found over 50% of everything we are going to find here. Once you find 50%, you naturally go into a decline. And here we are, 38 years later, and, my God, think about the amount of money that’s been spent trying to find more! We spend more every year and get no more net production. And the list of countries whose oil production has peaked keeps growing, including Russia, which for eight consecutive months has had year-over-year declines. Companies have the same problem. The latest results from Exxon [ticker: XOM] showed that its production was down about 3%.
(16 August 2008)
Who’s laughing now? Murti’s detractors eat crow
Oil prices. Analyst predicted ‘super spike’
James Bagnall, Canwest News Service; Ottawa Citizen
We are not returning to an era of cheap energy.
It was three years ago, an eternity in the foggy world of commodities trading, when Arjun Murti, a New Jersey native and analyst at Goldman Sachs, published a research note that competitors charged was riddled with irresponsible conjecture.
On a day when oil was trading at $55 (all U.S. figures) per barrel, Murti projected a “super spike” in which a barrel of crude could fetch $105 in the next few years.
Kevin Kerr, owner of the New York commodities research firm that bears his name, branded Murti’s report “nothing more than hot air.” An investors’ blog suggested darkly that Murti was involved in a conspiracy to jack up the value of his firm’s oil investments.
Today, Murti’s projection seems almost timid.
(16 August 2008)
Traditional Energy’s Modern Boom
High Prices Are Driving Increased Extraction of Oil and Other Fossil Fuels
Joel Achenbach, Washington Post
… This is the world of 21st-century energy, which around here looks surprisingly like 19th-century energy. There is little evidence that the old, conventional sources of energy are about to disappear, or that the free market by itself is going to drive a transition to clean, renewable power.
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With oil, gas and coal near record prices, there is an obvious market incentive to invest in renewable energy sources, such as wind and solar power. But those same high prices have also incited fossil-fuel companies to ramp up their drilling and mining.
(15 August 2008)
The Washington Post seems to have ramped up its energy coverage. See Tom Whipple’s semi-enthusiastic reaction: The peak oil crisis: The Washington Post meets peak oil lite (containst links to other WaPo articles) -BA
Why Does Abiotic Oil Theory Ignite Peak Oil Theorists’ Fulminations??
Raymond J. Learsy, Huffington Post
Abiotic Oil, calling into question the overarching theory that the origins of fossil fuel are of biological/organic origin was touched upon in my previous post, “Oil’s Big Dirty Secret as Producers Rake in Hundreds of Billions,” 04.12.08.
The comments to the post were wide ranging and the Peak Oil missionaries were apoplectic that one dared question their gospel intoning the sanctity of the biological origin of fossil fuels and its rapidly diminishing availability. Clearly the words “Abiotic Oil” stir up heated passions and clear concern among those in the oil patch who would be impacted were the theory to take hold. My post highlighted the issue without offering an opinion on Abiotic Oil Theory’s viability. It did however attempt to outline the reasons why the oil industry would happily not have the concept of “Abiotic Oil” taken with any grain of seriousness.
(14 August 2008)
