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Potential Energy Crunch
May Bring Other Fuels to Fore
Bhushan Bahree, Wall Street Journal
World oil and gas supplies from conventional sources are unlikely to keep up with rising global demand over the next 25 years, the U.S. petroleum industry says in a draft report of a study commissioned by the government.
In the draft report, oil-industry leaders acknowledge the world will need to develop all the supplemental sources of energy it can — ranging from biofuels to nuclear power to oil extracted by unconventional means from the oil sands of Canada — to meet soaring demand. The surge in demand is expected to arise from rapid economic growth in such fast-developing countries as China and India, as well as mounting consumption in the U.S., the world’s biggest energy market.
The findings suggest that, far from being temporary, high energy prices are likely for decades to come.
“It is a hard truth that the global supply of oil and natural gas from the conventional sources relied upon historically is unlikely to meet projected 50% to 60% growth in demand over the next 25 years,” says the draft report, titled “Facing the Hard Truths About Energy.”
“In geoeconomic terms, the biggest impact will come from increasing demand for oil and natural gas from developing countries,” said the draft report, a copy of which was reviewed by The Wall Street Journal. “This demand may outpace timely development of new supply sources, thereby pressuring prices to rise.”
…The conclusions appear to be the first explicit concession by the petroleum industry that it alone can’t meet burgeoning global demand for oil,
…The fact that the American petroleum industry is warning of a crunch could have an even greater impact [than the recent IEA report] on the debate over energy policy.
…The NPC is slated to vote on adopting the draft, which runs more than 450 pages, including annexes, at a meeting Wednesday in Washington to be led by Exxon Mobil Corp. former Chairman and Chief Executive Officer Lee R. Raymond.
(16 July 2007)
Here’s another link to the WSJ story.
Discussion at The Oil Drum.
Oil industry admits it cannot save us
Jerome a Paris, European Tribune
[quoting the WSJ story mentioned above], Jereome then comments:
Coming on the same day that the price of oil, as quoted in London, reached the records set last year (with a barrel reaching $78.40, vs a all-time-high of $78.65) and that the International Agency published yet another worrying report stating that “[g]lobal oil consumption is forecast to reach 88.2m barrels a day, up 2.2m b/d [2.5%] from 2007”, it is yet another sign that we are coming closer to the wall in our mad rush to burn ever more oil (see my previous “countdown” diaries, linked to at the bottom of this one).
Of course, the tone of that report is not quite that negative, in that they suggest that alternative sources of fuels will help us bridge the gap, but hey, you cannot expect the industry to encourage us loudly to reduce our demand for their products (they do mention it, en passant, as do all politicians, but it’s, as always, done without bite or without putting it at the forefront of policy suggestions).
In fact, rather than a wake-up call, this report appears to be more of an encouragement to continue as if nothing were happening. Biofuels and nuclear will provide, prices will be high and markets forces will play out. Damn nice, too, that: high prices “for decades to come”. Hey, it’s not their fault, so stop blaming them and cough up.
And, in fact, they are right. They are functioning within the same paradigm we all have been living with forever (except for that silly scare under that dour, nasty, President, Carter, thankfully quickly replaced by the smiling guy): the Western Way of Life is Not Negotiable, and we can burn as much of the stuff as we damn want. And the industry just has to provide. which, so far, they have done with great alacrity.
But as other countries start wanting to burn the stuff too (the Western Way of Life is Not Negotiable for them either), and the industry finds it increasingly difficult to provide, we’re stuck. And, instead of admitting it, and trying to change our ways just a bit (which would be mostly easy, if we don’t have to do it in a panic), we’re going for broke, depleting or pillaging more resources, wreaking havoc on food commodity markets, ruining those third world countries that have no oil production or no wheat, and spewing more carbon in the air.
So let’s have more drilling, more oil sands, more nuclear, and party on. And forget about the Cassandras, they have been wrong so often in the past.
(16 July 2007)
Also at Daily Kos.
ASPO-USA special on NPC report
Tom Whipple, ASPO-USA
ASPO-USA will be issuing a special edition of the Peak Oil Review this week. The entire issue will cover our summary response to the NPC’s’s “Facing the Hard Truths about Energy” report being issued this week. Our special issue will go out between late Monday and sometime Wednesday, depending on events.
The NPC will present their report on Wednesday July 18th at 9 a.m. in Salons D&E of the Marriott Hotel at 1331 Pennsylvania Ave. N.W. in Washington D.C. To tune in by webcast, check their website (www.npc.org) for details. The NPC will also be posting their report on-line sometime this week, portions of it possibly as early as today (July 16th).
(16 July 2007)
Peak Lite Revisited
Robert Rapier, The Oil Drum
While I believe that a global peak in worldwide oil production presents an unprecedented challenge to the way most of the Western world lives our lives, I do not believe that world oil production has yet peaked. However, in looking at the new oil capacity that is scheduled to come online, and contrasting that with the projected demand growth, it became clear to me over a year ago that demand was going to rise faster than new supply could come online.
This prompted me to propose the idea of “Peak Lite.” It is “peak”, because the symptoms will mostly manifest themselves as those of a true production peak: Not enough supply to meet demand. In fact, we have already passed the point at which there is enough $25/bbl oil supply to meet everyone’s desires. But production can still grow in this scenario, which is why it is “lite”. In that case, people may underestimate the significance of the problem.
…The International Energy Agency (IEA) has now endorsed the same general idea. In their July 2007 Medium-Term Oil Market Report (available for now here), they reach the conclusion of Peak Lite:
…In the event of a worldwide peak in oil production, there won’t be enough oil to go around. Poorer countries will find themselves priced out of the market at various price points. The situation will be the same for Peak Lite, and this is what we have observed in the past 2-3 years. Many developed countries have seen their oil consumption rise over the past 2 years, even though world oil production has been slightly negative. This means that demand destruction is occurring in some locations. I expect this trend to continue.
At the point that developed countries are bidding against each other for remaining supplies, the price of crude is likely to go much higher. Until now, demand has been moderated as poor countries in Africa and Asia are increasingly unable to afford $70/bbl oil. This price point is unlikely to significantly alter the demands of the United States, Europe, or Japan, which means that at some point of capacity erosion we could see oil prices quickly shoot past $100/bbl.
(16 July 2007)
Psychotic Break
James Howard Kunstler, Cluserf*ck Nation
A curious phenomenon worth attention from pathologists in the financial press is the now nearly complete de-coupling of the finance sector from the salient ominous trend in the oil sector: the fast-developing permanent oil export shock. By that I mean a severe decline in export ability by those nations currently supplying the US, Europe, China, and Japan — an export decline that will far exceed actual production decline rates in Saudi Arabia, Russia, Venezuela, the North Sea, Mexico, and Iran.
This story or scenario developed by Jeffrey Brown and statisticians at The Oil Drum, is pretty easy to understand: production declines in these nations will combine with greater internal oil consumption to severely curtail exports in a shockingly brief time frame. The populations of Saudi Arabia, Venezuela, and Iran are growing; car sales in Russia are up 50 percent this year; even Norway is using more of its own oil every year. These nations are consuming about 25 percent of their total liquids (regular crude plus natural gas liquids and condensates). Basically, the picture shows that net exports from these nations will run to zero in nine years. And they will be low enough within five years to throw the importing nations into complete economic paralysis.
The situation is even darker for the US because our number three source of imports, Mexico, is showing production declines far worse than the other exporting nations, suggesting not only that the US will receive no oil from Mexico in only two or three years, but also that the Mexican economy is likely to collapse and plunge that nation into political turmoil — just what we need along our 2000-mile border.
It’s against this background that the stock market melt-up of 2007 presents a virtually psychotic picture of disconnection from reality, because the oil story says, essentially, that the global economy as we know it can’t possibly continue to operate, and that therefore investment in its future operations is certain to go up in a vapor.
(16 July 2007)
Sam Penny was also influenced by Jeffrey J. Brown’s analysis, leading him to wonder: Could things be worse than what we doomers thought?. Penny writes:
Sometimes new trends stand out in the comments to the blogs and news feeds about peak oil. The strong reactions generated by Jeffery’s post are a case in point; several others see peak exports as sooner and more serious than peak oil, and unlike oil production, exports can go to zero.
Energy price could bust the boom
David Uren, The Australian
RISING energy prices could yet be the pin to prick the global economic boom.
The International Energy Agency warns that soaring demand from emerging nations could crash into the ceiling of non-OPEC oil supplies over the next three years.
The result could be energy prices spiralling high enough to choke economic growth.
The IEA expects tightness in oil and gas markets to be mutually reinforcing. When short of gas, industry turns to fuel oil.
“Ultimately, this may lead to upward pressure on fuel oil and gas prices until electricity or industrial demand growth abates,” the agency says.
Industrial production may, at an extreme, respond to high prices, but the IEA is less confident about the elasticity of the demand for energy for transport.
…There has been debate in the past week about the IEA’s confidence in Saudi production.
Comments on the widely followed oil industry blog, The Oil Drum, have noted that Saudi production has been falling over the past two years from 9.5 million barrels to a current level of 8.6 million barrels a day, and questions are raised as to whether Saudi’s reserves are depleting more rapidly than expected. The IEA says questions about the strength of Saudi and other OPEC investment belong more to the period after 2012 than the current expansion phase.
(15 July 2007)
Note the mention of The Oil Drum, although as EB readers know, it is not related to the oil industry.
Contributor Stuart McCarthy writes:
Uren doesn’t dare use the word “peak”, nonetheless this is a good summary of last week’s IEA report from a leading economic commentator in the national daily.
