Peak oil – Sept 14

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Many more articles are available through the Energy Bulletin homepage

The end of oil
Steve Hargreaves, CNNMoney.com
A small – but growing – group of experts think world oil production will peak in the next few years, to devastating effect.
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At some point in the near future, worldwide oil production will peak, then decline rapidly, causing depression-like conditions or even the starvation of billions across the globe.

That’s the worst-case scenario for subscribers to the “peak oil” theory, who generally believe oil production has either topped out or will do so in the next couple of years.

What follows depends on who one talks to, but predictions run the gamut from the disaster scenario described above to merely oil prices in the $200-a-barrel range while society transitions to other energy sources.

It’s not a view held by most industry experts, including the oil companies, the government and most analysts at the financial houses.

But its adherents are growing, and include some fairly well-known names.

In the coming week, a former chairman of oil giant Royal Dutch Shell (Charts) is speaking at a peak oil conference in Ireland, as is former U.S. Energy Secretary James Schlesinger.

Most peak-oil proponents simply don’t believe the numbers put forward by industry and the government.

The world will produce 118 million barrels of oil a day, up from its current 85 million barrels per day, just to satisfy projected demand by 2030, according to the Energy Information Agency.

“That’s never going to happen,” said Richard Heinberg, a research fellow at the Post Carbon Institute and author of three books on peak oil.

…Web sites devoted to peak oil sell numerous survival-style books seemingly geared toward a society in which, at the very least, the basic economic infrastructure has broken down – if there’s not total anarchy.

From the Web site lifeaftertheoilcrash.net, titles include “Gardening When it Counts: Growing Food in Hard Times” and “Crisis Preparedness Handbook: A Comprehensive Guide to Home Storage and Physical Survival.”

“It’s fear mongering, sensationalist crap,” said Fadel Gheit, a senior energy analyst at Oppenheimer.

Gheit says there’s plenty of oil out there, it just needs to get to a price where it’s profitable to extract.

“We have so far consumed one trillion barrels” in all of history, he said, pointing to a 2000 study from the U.S. Geological Survey that made predictions based on rising prices, technology advances and assumed new discoveries based on past finds. “There are three trillion more to go.”

…But whether oil production peaks or not, by pushing crude prices up more than eightfold over the last 10 years, traders clearly believe supplies will strain to keep up with demand.
(15 September 2007)

Not black and white
Dave Cohen, The Oil Drum (Comment on Drumbeat)
… Why must there always be two extreme polarized positions in this peak oil debate?

Why must the world always be black or white?

I have a scenario, reasonable in my view, that sees the world topping out at somewhere over 87 to 88 million barrels a day (all liquids) in about 4 years. There may be a dozen or more independent variables that must be fixed to get that result. Geopolitical variables,OPEC variables, price variables, inflation variables, other demand-side variables, upstream variables, substitution (for oil) variables, etc. See the problem? My reasonable scenario could be off in either direction, perhaps very badly.

I’ll give you an example. [Dave cites Thursday’s article at CNN excerpted above: The end of oil

…But suppose my scenario is correct. That would entail that the oil supply would continue to increase for a few more years. That doesn’t negate peak oil-it still arrives. It’s just a bit later than many think. Does 4 years and 2 to 3 million barrels a day matter? Not at all. If conventional oil reserves are few hundred billion barrels higher than some people think they are, does it matter? Not at all.

When the peak oil debate takes its usual polarized form, it impoverishes us all.

I generally apologize to anyone I have insulted on this weblog. But I’ll tell you the reason why-all these extreme statements coming from both sides of the debate just make me crazy. It’s hard to stay sane. And because oil is the lifeblood of the world’s economies, it makes everybody extra crazy, including me.
(15 September 2007)
Dave Cohen is an “contributor emeritus” at The Oil Drum and current writes a weekly article for ASPO-USA. -BA

Queensland govt warns of `peak oil’ chaos
Paul Syvret, Courier-Mail (Australia)
QUEENSLAND is heading for an oil shock. And it is not a matter of if, but when.
As crude oil prices hit a record high yesterday, an as-yet unreleased Queensland Government report warns of massive social dislocation, rising food prices and infrastructure headaches because of rising oil costs.

The report on the looming “peak oil” crisis concludes that we will have to re-think the way we live and travel in the next few years as relatively cheap liquid fuels become a thing of the past.

“Peak oil” refers to when global output fails to meet demand, a situation the report estimates will occur in the next few years, although some economists believe we are now on the cusp.

The report, Queensland’s Vulnerability to Rising Oil Prices, comes as crude oil prices pushed through $US80 a barrel for the first time in trading on Thursday night – triple the price of five years ago.

The effect already is being felt at the bowser, with petrol in Brisbane yesterday selling for as much as 129.9¢ a litre.

The report was prepared by a taskforce of scientists and industry experts, including Queensland’s chief geologist John Draper and the Department of Primary Industry’s chief scientist Joe Baker, and chaired by the newly appointed Minister for Sustainability Andrew McNamara.

Of the three scenarios mapped out for world oil prices by the report, Mr McNamara said we were already in the worst case “high oil price” scenario.
(15 September 2007)
UPDATE (Sept 14, 2007):
Global Public Media just posted an audio interview with background on what the heck is going on in Queensland:

Stuart McCarthy of the Association for the Study of Peak Oil and Gas talks to GPM’s Andi Hazelwood about Queensland’s new leadership, Andrew McNamara’s recent appointment to Minister for Sustainability, Climate Change and Innovation, McNamara’s “Queensland’s Vulnerability to Rising Oil Prices” report three years in the making and today’s coverage of this landmark report in Brisbane’s Courier-Mail newspaper. Also on the table for discussion are McNamara’s views on Queensland council amalgamations and nuclear, and the latest activities of ASPO international and in Australia.

Andrew McNamara: Wartime mentality needed
Courier-Mail (Australia)
THE world is not about to run out of oil, according to Queensland’s new Minister for Sustainability Andrew McNamara.

“But it is about to run out of cheap oil,” he said. “The degree of social dislocation, the degree of pain, will depend on how urgently we respond . . . in the end we will have to adopt a kind of wartime mentality (to oil use).”

He said the report commissioned by the Government on the looming peak oil crisis warns that rising oil prices will continue to fuel inflation and interest rates, placing further pressure on so-called “mortgage belt” families in outlying suburbs.

Not only will their cost of transport rise dramatically but so will mortgage repayments and the cost of food due to rising transport charges. As at 2004, 15 per cent of Australians’ disposable income went on transport, and that was with considerably lower fuel prices.
(15 September 2007)
Related article in Courier-Mail with quotes from report co-author Jago Dodson: .

NPC report presented to Houston to petroleum engineers
piccolol, The Oil Drum (Drumbeat comment)
The NPC report (TOD discussions here and here) was presented yesterday in Houston to a lunch time meeting of the Society of Petroleum Engineers. The audience was mainly professionals from the oil and gas industry, service companies, and banking. There were 120 attendees, which is higher than average for this forum.

The presentation was by Rod Nelson of Schlumberger. Rod gave an excellent and balanced presentation of the report.

ASPO and Peak Oilers were mentioned prominently at two points. One slide clearly showed the ASPO reference case that estimates a peak in about 2015 (as I recall). This was contrasted with the EIA case showing steady oil production growth the 2030, and an average case from international oil companies that was less optimistic but close to the EIA case.

Rod also made the point that views from a number prominent personalities from the peak oil community were solicited. Some mention of this input has also been discussed, I believe, in past posts on TOD.

During the Q&A session I asked (already knowing the answer) whether the NPC took a position on if and when oil would peak, and also on oil price. The answer of course was that they did not take a position on either of these, one reason being the political sensitivity of their conclusions . But Rod did not shy away from the idea that peaking was indeed shown in some cases and that things were not all rosey. Overall I think it was a remarkably honest report considering that it was requested by the current administration and that the effort was lead largely by oil company people.

His biggest point was that there was no one solution that would fix the US energy challenge. There needs to be efforts toward better energy efficiency, improving extraction technology, widening the energy mix, diversifying energy sources, etc. The previously verboten topics such as demand reduction, energy efficiency, and controlling CO2 emissions were all put front and center as part of the solution.

One interesting point Rod made is that several of the presidential candidates are interested in energy issues and have asked for a briefing on the NPC report. They are also in dialogue with the officials in the current administration who seem to be serious at least about understanding the recommendations, if not also acting on them.
(15 September 2007)
Also, note Gail Tveberg’s post on the NPC report, which was more favorable post than many others at TOD.

The Economics of Oil, Part II:
Peak Oil and the Energy Supply Curve
Robert Smithson, The Oil Drum
The world’s oil supplies are not unlimited. Unless the abiogenic theory of oil is correct, then reserves will one-day dwindle, and production will decline. New barrels cannot be “magic-ed” by some trick of economics. Extraction of any fossil fuel extraction is limited. Peak oil is inevitable. Of course, there is debate about when production hits its highs; it may have already happened, perhaps it will come in the next few years, and just possibly, it will be in 2020 or later. But make no mistake about it, we are not endowed with infinite amounts of the stuff.

Sceptics rightly point out that this bell has been rung before. In the mid 1980s, world oil reserves were forecast to last about 20 years; and yet here we are in 2007, with near record production levels. Historically, we have always found new sources of oil – in Alaska, in the North Sea, in the Gulf of Mexico, and off the coast of Africa – to satisfy our addiction. There are prospects in the future too: there may well be (very substantial) new discoveries in the Middle East, ultra-deepwater drilling holds promise, as does the development of new areas such as the South Atlantic, and increased enhanced oil recovery will certainly play a role. This misses the point: finding new oil reserves may push out peak production, but it does not invalidate the concept. Our planet does not contain an unlimited amount of oil.

Many – particularly on this site – argue that economics has little that is intelligent to say about peak oil. Yet the very definition of economics is the study of scarcity, and in particular, the study of the efficient allocation of scarce resources. What more relevant subject could there be for studying the effects of peak oil?

Robert Smithson, a portfolio manager at a London based investment fund.
(13 September 2007)

The Round-Up: September 14th
Stoneleigh, The Oil Drum: Canada
Today’s Round-Up focuses on disappearing acts. First, out of $12 billion in $100 bills that were physically flown from the New York Fed to Baghdad, $9 billion are missing. Second, more of life on earth is vanishing – the updated Red List of endangered species shows a large increase in species in critical condition.

In the world of finance, the next month is full of key moments, where debts will have to be covered, paper of various sorts matures, hedge funds will need to fork over lots of cash to investors who want out, and take-over deals will come under scrutiny. It looks like trillions of dollars could disappear from the markets before the end of the year.

And Greenspan had no idea. None. Now there’s a mystery.
(14 September 2007)
Many headlines and excerpts follow at the original.

Declining Net Oil Exports Versus “Near Record High” Crude Oil Inventories:
What is going on?
Jeffrey J. Brown, The Oil Drum
Building on prior work by Matt Simmons and Kenneth Deffeyes, I have written a number of articles on Net Oil Exports, often with my frequent co-author, “Khebab,” most recently, “Net Oil Exports and the Iron Triangle.” We are going to present a quantitative assessment of future net exports by the top net exporters at the ASPO-USA (Association for the Study of Peak Oil & Gas) conference in October, in Houston, Texas, and we will be doing a preview of the paper in late September.

It’s interesting that the UK and Indonesia showed even sharper net export declines, going from peak recent net exports to net importer status in seven years and eight years respectively. The ELM and the UK and Indonesia case histories showed that net export declines tend to accelerate with time.

Note that the early data for Saudi Arabia are showing a similar pattern.

…My contention is that instead of focusing on crude oil inventories, we need to focus on world net exports, crude oil prices, refinery utilization, product prices and product inventories.

I expect to see crude oil exports trending down, crude oil prices trending up, refinery utilization trending down, product prices trending up, and product inventories trending down.

This is a guest post by Friend of TOD Jeffrey J. Brown, an independent petroleum geologist in the Dallas, Texas area. His e-mail address is [email protected].

You can also check out Jason Bradford’s recent interview with Jeff for The Reality Report over at Global Public Media here.
(15 September 2007)

ODAC News – Friday 14 Sept
Douglas Low, Oil Depletion Analysis Centre
Economy – UK
1a/ Mervyn spanks banks (BBC News [Robert Peston], Wed 12 Sep)
1b/ Scything the City (BBC News [Robert Peston], Thu 13 Sep)
1c/ Northern Rock is bailed out by Bank of England (The Times, Fri 14 Sep)
1d/ Northern Rock shares plunge 32% (BBC News, Fri 14 Sep)

Biofuels
2/ Doubts raised over EU’s biofuels target (Financial Times, Thu 13 Sep)

Middle East
3/ Saudi to fence off Iraq (Arabian Business, Wed 12 Sep)

Natural Gas – UK/Norway
4/ Norway’s giant Ormen Lange gas field starts production (Platts, Thu 13 Sep)
Global Oil Production
5/ A Non-OPEC Progress Report (ASPO-USA, Wed 12 Sep)

Food Prices
6/ The market ingredients are put in place for a more costly full English breakfast (The Times, Fri 14 Sep)

Natural Gas Exports – Russia to Western Europe
7/ Flash Points: Russia’s Pricing Weapon (Energy Intelligence [Energy Compass], Fri 14 Sep)

Peak Oil Report – Queensland, Australia
8/ Govt warns of `peak oil’ chaos (Courier Mail [Australia], Sat 15 Sep)
(14 September 2007)