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Peak Oil: why $40 per barrel is no cause for complacency
David Strahan and Gary Kendall, SustainAbility
… The subsequent oil price collapse is just as misunderstood as the spike that preceded it. Of course, the price is falling because demand is shrinking, and that’s due to the recession. But what caused the recession? The obvious culprit is the banking crisis, which has clearly been extraordinarily damaging. But so too are oil price spikes; every major recession since World War II has been preceded by one.
It’s not hard to see why: the global transportation system – moving goods, workers and consumers around, thereby enabling an increased level of economic activity to take place – is almost entirely fuelled by crude oil. When the price of oil soars, almost all aspects of modern daily life become more expensive. And as the oil exporters accumulate more of the world’s money, so everyone else has to make do with less.
The 2008 spike not only set a new record high oil price, in both absolute and inflation-adjusted terms, but it was also very sudden, with the price almost trebling in around eighteen months. So it seems highly likely that even without the credit crunch, the oil market fundamentals would have been sufficient to push us into a global recession.
… Far from being a source of relief, today’s relatively low oil price is as damaging in its own way as the spike. Oil companies around the world are cancelling or delaying investment in planned production projects, because they are uneconomic at current levels; $60 billion of investment in the Canadian oil sands was shelved in the three months to January alone. At the same time, existing global production capacity is constantly shrinking, as oil fields age and reservoir pressures decline.
… If we are still in the foothills of peak oil, there is good evidence to suggest we will reach the summit well within most companies’ planning horizons.
David Strahan is the author of The Last Oil Shock: A Survival Guide to the Imminent Extinction of Petroleum Man.
Gary Kendall is the Director of Climate Change Programs at SustainAbility, and author of Plugged In: The End of the Oil Age.
(20 February 2009)
The great oil output race
The National (United Arab Emirates)
From the deep waters of Brazil to complex and expensive projects in Canada, oil companies are in a desperate – some say losing – race to raise output from new projects faster than old ones decline.
“Peak oil”, a peak in world production, could still be decades away, according to the most optimistic forecasts, but a peak in non-OPEC production is already upon us, many experts say.
About two-thirds of the world’s oil comes from countries that are not part of OPEC and official energy forecasts indicate that an increase in production in this area will prove crucial to meeting growing demand in the developing world. Yet many experts say the combination of the economic crisis and natural depletion of reserves means there is little possibility that the total amount of crude produced outside of OPEC will grow at all in coming years, if ever.
(21 February 2009)
Energy secretary predicts higher demand for oil
H. Josef Hebert, Associated Press
Energy Secretary Steven Chu, a champion of renewable energy and biofuels, has no delusions about the future of oil. Global demand for it will increase over the next two decades even with more efficiency and alternative fuels, he says, and prices will again go higher.
Chu, during an hourlong meeting with reporters Thursday, discussed the futility of predicting oil prices in the short run, the need for a national electricity transmission system, and the urgency of getting the billions of economic stimulus dollars to the nation.
… “After we get out of the deep recession the world is in now I see higher demand” for oil, said Chu, although he hoped the push to alternative fuels and greater efficiency “can help the U.S. greatly decrease that demand.”
He predicted oil will become more expensive to produce because of the decline in conventional sources and, he said, “that drives the price up.”
(19 February 2009)
Oil companies spend millions to protect the primary source of the world’s energy (cover story)
The Gulf Online
A fragile lifeline
… Twenty years ago, says the head of security for one state-owned Gulf oil company, “security was there to stop you stealing pencils from the refinery”. Today, the threat to regional oil infrastructure is such that oil companies have no choice but to invest heavily in state-of-art security equipment and manpower, says the official, speaking to The Gulf on condition of anonymity.
“We explore for oil, we pull it out of the ground, we send it through pipelines to our facilities, we produce the product, we refine the product, we ship the product and on a local basis we sell the product. So we’ve got distribution tanks, we’ve got tankers, we’ve got gaslines to ships, we’ve got our own wharf. Obviously the centre is the refineries and the field area, we have got responsibility for the gas system, and we run the filling stations.” Each part of this lengthy production chain contains opportunities for terrorist attack.
Of all the Gulf states, Saudi Arabia, the world’s largest oil producer, has done the most to address security concerns. In his Pulitzer Prize-winning history of Al Qaeda, The Looming Tower, journalist Lawrence Wright reports just 1,000 Saudi National Guard members stood between their country’s eastern oilfields and the army of Saddam Hussain after Iraq invaded Kuwait in 1990. Today, Saudi Arabia can call upon a 35,000-strong force to protect its facilities and will spend $14 billion over the next six years to improve oil security. Each major installation has its own specialised security unit, while helicopter and F15 patrols keep watch from the air and the coastguard and navy protect coastal facilities from the sea.
(21-27 February 2009)
