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The Peak Oil Crisis: The First Casualty
Tom Whipple, Falls Church News Press (US)
When the historians come to write the history of the 21st Century, they may well record that the African nation of Zimbabwe was the first to succumb to peak oil.
For students of African economies, the current Zimbabwean meltdown comes as no surprise. During the last decade, Zimbabwe ‘s dysfunctional government got itself involved in war that drained the treasury and then implemented a land redistribution program that drove out the white farmers. …
A few years ago, the government turned much of the oil import business over to the private sector while retaining price caps on retail gasoline. Obviously, when the cost of oil got higher than the permissible sales price, gas stations went dry. This has resulted in a black market where gasoline is selling for ten times the controlled price.
While Zimbabwe ‘s multiple economic problems make it an atypical case, it is the first country to run almost completely out of oil. This, in turn, gives us a look at what will happen as the consequences of expensive and scarce oil spreads around the globe.
By last week, nearly all buses and commuter taxis in the capitol, Harare , had stopped running, forcing tens of thousands to walk to work. While there are still a lot of private cars on the road, they are being fueled with $36 a gallon black market gasoline. …
(22-28 September 2005)
Time to stop mainlining petroleum before it kills us
Roland M. Herrmann, The Free-Lance Star
Although Hurricane Katrina was a horrible tragedy, let’s look at what we can learn from it. Let’s not consider it just an act of God. Global climate change is undisputed by the scientific community. As the global temperature rises, there will be more storms. Evaporation from the increased temperature will bring more moisture into the atmosphere.
As water temperatures rise, storms will become more violent, as hurricanes build to greater strengths when fed by warm waters. As water levels rise, more areas will be at risk. We will see increasingly violent storms in the future. …
We must kick the petroleum habit before it drains our federal coffers, kills more of our brave young men, and destroys our health and our environment. Wind power is now as cost-efficient as oil. The Plains states have the potential to produce vast amounts of this kind of clean, renewable energy. …
Instead we choose to pump billions into oppressive regimes that use the profits to buy our military hardware. Talk to your elected officials, for your sake and that of your children.
(23 September 2005)
Energy leaders search for crude solutions
London conference addresses oil-production problems
John W. Schoen, MSNBC
LONDON – With global oil production already stretched to the limit, hurricane Katrina put a serious crimp in the world’s energy pipeline. The task of restoring Gulf oil and natural gas production to pre-Katrina levels will take months.
Now, with global demand still rising — especially in rapidly developing countries like China and India — oil industry and government leaders around the world are struggling to find ways to produce enough oil and gas to keep the world’s economy from sliding into recession. The effort is playing out amid a widening debate about the reasons global oil production hasn’t expanded fast enough to keep up with growing demand.
At a two-day conference here, oil industry executives, analysts and leaders from oil producing countries are looking at a variety of pieces of the puzzle. But the central question remains: Can more oil be found and produced fast enough to head off a global energy crunch?
The only honest answer is: No one knows for sure.
No one doubts that there is plenty of oil underground waiting to be tapped. As of the end of 2003, the world’s estimated remaining reserves stood at over 1.1 trillion barrels, according to the American Petroleum Institute. The industry trade group figures that’s enough to continue producing at 2003 rates for another 43 years even if no new oil is found.
But reserves aren’t worth much unless than can be pumped out of the ground fast enough.
(23 September 2005)
Long article that gives a hearing to Deffeyes and Simmons, ending on a positive note from the latter.
An Opportunity Missed
Roland Watson, New Era Investor
To pique my interest, the BBC News 24 channel’s “Hardtalk” was on the subject of the “Oil Crisis” last night. As the camera introduced us to the various participants, I eagerly awaited the sight of perhaps Matt Simmons or Colin Campbell or some other Peak Oil expert.
The list was certainly heavyweight as we were introduced to the Nigerian Oil Minister, the CEO of Schlumberger, the former chief executive of Saudi Aramco and some Indian official I didn’t recognise. So my expectations deflated somewhat when no one else was brought into view and I realised the debate was going to be rather one sided. I was not to be disappointed.
Nevertheless, it was interesting to hear these important men on the subject of the current oil supply problem.
First and foremost, the blame was firmly placed by all on the lack of refining capacity.
…The CEO of Schlumberger only muddied the waters slightly by letting slip that oil companies were not sitting on huge cash reserves for nothing, they were just finding it harder to get at areas where a decent return could be made. That point was not dissected further unfortunately.
So, the interview ended and all was right with the world despite this gasoline hiccup. The message was very much “Don’t worry. Smile and be happy!”. Say “Gouranga” and those cheap barrels of crude are just going to keep on flowing until we can all seamlessly move into the slipstream of some new, rich energy source such as dilithium crystals or whatever.
Then again, I leave you with the comment of the ex-Aramco chief who candidly expressed that there was no real substitute for crude oil. That was indeed the most accurate thing I heard from those four gentlemen over the entire program.
(23 September 2005)
Some slight progress on public discussion from a year ago, but can we afford such a shallow learning curve? -LJ
The pain of oil addiction hits home
Peter Hartcher
Rising prices will force the world to reassess its use of limited energy resources
————
GRAEME Samuel has a party trick that he uses whenever he speaks to public gatherings. Sometimes the chairman of the Australia Competition and Consumer Commission, the national competition watchdog, even tries it at dinner parties and social occasions.
First he asks if anyone can tell him the price of petrol. Every audience gets this right to within the nearest 10th of a cent. Next he asks the price of milk. Vague guesses follow. It’s rare that anyone gets it within about 10 cents of its price.
The point he is illustrating? That petrol is by far the most price-sensitive product in Australia. Samuel has used this trick on countless occasions and it has only failed him once – with an audience that included the managing director of a milk producer.
Petrol is unique as a consumer item. Nothing else, not even house prices, attracts as much angst, and no other consumer product is as politically sensitive. This is not just an Australian phenomenon.
(23 September 2005)
‘Sensitive’ to petrol prices we may be, but demand is transperantly fairly inelastic in the range we’ve seen so far (five years of rising prices haven’t slowed demand growth). Not even a mention of total supply limits, still taboo in Australian media.-LJ
Why Simmons is wrong about Saudi Oil
Ali Daneshy. World Energy Source
Matthew Simmons’ arguments in Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy are providing more ammunition to the proponents of peak oil. I’m not the first one to disagree with Simmons on his thesis about Saudi oil. Michael Lynch, a leading critic of the peak oil theory, has also criticized Simmons’ approach.
In his book, Simmons warns that Saudi Arabia cannot boost its production to “10, 12, or even 15 million barrels of oil a day for the next 10 or 20 years, let alone 50 years” and that “nothing in the data supports the claim that Saudi Arabia can maintain production at current levels for more than five to 10 years.”
Simmons means well in this and other writings and should be commended for it. He fully recognizes the importance that energy plays in our standard of living and the welfare of the world, and he is obviously worried. But he is quite wrong on Saudi Arabian oil production potential.
Saudi Arabia’s high oil production is not a recent or momentary event. Saudi Arabia has been producing at more than 9 million barrels per day for the last 13 years, and at around 10 million barrels per day for the last three. When natural gas condensates are included, daily production now equals nearly 12 million barrels of liquids.
…I am not at all worried about Saudi production capacity for decades to come. Simmons’ book is way off base.
Ali Daneshy is the director of petroleum engineering at the University of Houston and retired vice president of Halliburton. He has more than 35 years of experience in the oil and gas industry covering much of the energy-producing world. He has authored numerous papers on technology and management in the oil and gas industry.
(23 September 2005)
Peak Oil and Japan’s Food Dependence
Andrew DeWit, Japan Focus
After a reprise of Peak Oil concepts, DeWit talks about Japan:
… Japan’s mainstream media has studiously avoided addressing the issue of peak oil, even though the country has essentially no oil reserves. Searching the databases of the major Japanese newspapers yields one lone Asahi newspaper piece from last January 16. And searching google with the various Japanese translations of “peak oil” renders only a few hundred hits, whereas searching in the original English produces about 1,700,000 hits.
Indeed, there appears to surprising complacency in Japan in general concerning oil prices. Even as China scours the world in search of energy deals, Japan seems content with far less. Moreover, in negotiating energy deals with Russia, for example, the Japanese state seems as concerned to limit supplies to China as it is secure its own needs. This complacency is perhaps based on the belief that the energy price increases are temporary and are just as likely to be followed by a glut, as Daniel Yergin of Cambridge Energy Research Associates and several other analysts argue. If one believed this line of thinking, then heavy investment in expensive new supplies – as the Chinese are doing – would make little sense except as an expensive form of insurance. It could be that Japan, with the OECD’s highest public debt as a ratio of GDP, is reluctant to spend money and thus very open to arguments that it really does not have to.
In addition, the Japanese are rightly proud of their proven ability to weather oil-price increases by increasing fuel efficiency. Static calculations suggest that Japan is far better equipped than the US and EU to deal with another round of price hikes. In its September 12 edition, Morgan Stanley’s online newsletter reviewed recent calculations by the Cabinet Office’s Maeda Akira. The calculations indicate that oil would have to go to US$129 per barrel before Japan suffered a shock comparable to the 1979 second oil price shock. By contrast, the US and EU were far more vulnerable, as prices would only have to go to US$81 or US$77, respectively, before they suffered damage on the scale of 1979 and afterwards. Before prices went to those latter levels, the EU and the US would presumably do their utmost to bring them down. Japan could thus count on its western allies to act as tripwires and mobilize on oil prices long before it was forced to.
… Unlike America, Japan’s challenge isn’t upping gasoline taxes in order to encourage fuel efficiency and discourage unnecessary driving in the world’s most wasteful society. Japanese and European taxes on petroleum burden a barrel of oil by about $US80 to 90, while American fuel taxes are a very light touch at about $US11. Japan thus already has high fuel taxes, which in turn promote fuel efficiency and encourages use of mass transit. It also has perhaps the best record of cutting energy use per unit of economic output. Data for 2000 compiled by the Japanese Natural Resources and Energy Agency indicate that if Japan’s unit energy consumption per GDP in the industrial sector is set at 1, then that of the US is 1.65, the UK 1.33, France 1.1, and Germany 1.17.
… Japan only produces 40 percent of its food supply. According to the Food and Agriculture Organization (FAO), ranking 28th out of the 29 OECD countries. By comparison, the UK’s food self-sufficiency ratio is 74, Germany’s is 96, America’s 125, and that of France is 132. Moreover, FAO data show that Japan’s self-sufficiency is declining, having dropped from 60 percent in 1970 to its present low level. By contrast, the UK has gone from 46 percent self-sufficiency in 1970 to its present ability to supply about three-quarters of its consumption. And German self-sufficiency in 1970 was a relatively low 68 percent compared to its nearly complete self-sufficiency today. These data underline the failure of Japan’s postwar agriculture policy. The self-sufficiency rate for rice in Japan is 100 percent, but only 14 percent for wheat, 6 percent for beans, 82 percent for vegetables, 44 percent for fruits, 54 percent for meat and 57 percent for seafood.
As noted above, Japanese consumers already “eat” a very great deal of oil. Not only is there much domestic haulage, but the more than 60 million tons of food imported annually is transported over great distances as in the case of North American grain and fruit, and Australian beef. Japanese attention to the food problem, however, has thus far centred on the amount of food wasted and the environmental impact of the greenhouse gases give off.
… The extent of this transportation of foodstuffs can be calculated as “food mileage” by multiplying the transportation distance with the volume of food transported. The higher the food mileage, the larger the burden that a particular country places on fossil-fuel resources, as well as the global environment.
…Japan’s total food mileage in 2001 was a massive 900 billion ton-kilometres. This was more than three times that of the United States. But the numbers are even more startling when seen in per capita terms. Each Japanese consumer annually consumed 7093 ton-kilometres of food whereas consumers in the US consumed 1051. Even Britain, another island nation, took only 3195 ton-kilometres per capita.
Andrew DEWIT is associate professor of Economics at Rikkyo University in Tokyo and a Japan Focus coordinator. He wrote this article for Japan Focus. Posted September 22, 2005. The author can be contacted by e-mail at [email protected]
(22 September 2005)
About Japan Focus: “Japan Focus is a refereed electronic journal and archive that chronicles Japan and the Asia-Pacific in global perspective, encompassing politics, economics, society, history, culture, international relations, war and peace, and historical memory.”
This article is also posted at Global Public Media.
Rita: Storm May Be the Coup de Grace for the American Economy and Many of Us As Well
Michael C. Ruppert, From The Wilderness
As I pack my bags to head to Washington for Congressional Black Caucus hearings on the September 11th attacks (to be conducted this Friday and Saturday) my inbox is being progressively flooded with emails from inside sources in the energy industry about what Hurricane Rita is now likely to accomplish – the near-complete destruction of an already teetering US economy.
Fully 30% of all US refining capacity is in the target zone. Perhaps most importantly, almost every refinery capable of producing diesel fuel is in immediate danger. This promises (especially in the wake of Katrina) a devastating and irreplaceable shortage of the diesel fuel needed to power America’s harvest of grain and food crops this month and next. Without diesel fuel to power the harvesters and combines, crops may be left to rot in the ground presenting a double whammy: food shortages (with prices that may treble or quadruple) and export defaults negatively impacting the financial markets and trade deficit.
(21 September 2005)
No surprises for regular readers of M.Ruppert.-LJ
Are we now in an energy hole? (1.14 MB PDF)
Matthew Simmons, Simmons International
Slides from a presentation to World Affairs Council, Houston, Tx.
…
I Believe We Are Now In A Deep Hole
* Spare capacity is over.
* System was too tight in 2004 and only got tighter.
* Adding significant capacity in key bottlenecks takes 5 – 15 years to effect.
* Too much oil and gas production is now in irreversible decline.
* Demand has a resilience not easily hampered by price.
* Stocks got to “just-in-time supply.”
Katrina Was An Energy Tipping Point
* Risk of experiencing finished product shortages over next 6 months is high.
* Risk of forced natural curtailment is high.
* Rig shortage was already real and got far worse by systemic mooring system failures.
* It might be impossible to recreate energy cushion without permanent demand destruction.
* The pain is currently U.S. based: The tightness soon becomes global.
…
Post-Peak Oil Is A Big Deal
* Oil demand growth is insatiable.
* Oil use can never exceed useable supply.
* Working out a peaceful resolution to this pending clash can be done, but will not be easy.
* If issue is ignored and it happens, it becomes a social tipping point.
* It is past time for data reform.
* It is time for a Global Energy Summit.
(13 September 2005)
Class Outline
Oil Famine: Surviving a Post-Oil Future
Kurt Cobb, Resource Insights
I’ll be teaching a two-session class on world peak oil production this fall. Below I am posting information on the course.
Course Description
Cheap oil is coming to an end. Within the next decade or two world oil production is likely to reach a peak and then begin an irreversible decline. The end of cheap oil threatens to stall and even reverse economic growth worldwide. It could lead to profound disruptions in our way of life, especially in the areas of transportation and food production.
This course examines the inevitable collision between our growing thirst for oil and the certain decline in its availability in the years to come. What might the consequences for the world economy be? Can we find alternatives to oil before its production begins to decline? What can an individual do to help us make a successful transition to a post-oil economy? Alternative energy, lifestyle changes, conservation and efficiency measures will be discussed.
(22 September 2005)
Kurt’s original post has a schedule and a list of readings (many of which are online). This is a great resource for the increasing number of community study groups on oil depletion.-LJ
