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Jeffrey Brown and the Net Oil Exports Crisis
Kurt Cobb, Scitizen
With peak oil comes peak oil exports. Why Texas oilman Jeffrey Brown thinks the world is headed for a drastic energy downsizing and soon.
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Texas oilmen who advocate for 1) a massive reduction in oil consumption through the electrification of transportation, 2) large investments in energy efficiency and 3) the relocalization of commerce to reduce the long and energy-intensive logistical lines now typical of the globalized economy are about as rare as vegetarians at a cattlemen’s association luncheon. In fact, Jeffrey Brown, a Dallas-based independent petroleum geologist who manages a joint-venture exploration program, may be one of a kind. The genesis of his rather radical views–radical, that is, for a Texas oilman–are a simple question he asked himself several years ago: What happens to oil exports in a world with constrained oil supplies?
“Low single-digit decline rates, that’s what people [concerned about the peaking of world oil supplies] have been thinking about,” Brown told me in a recent phone conversation. But he wondered what such decline rates for world oil production might mean for oil exports and by definition for the oil importers dependent on them.
His pondering led to the creation of the the Export Land Model. It goes something like this: A hypothetical oil exporter–let’s call it Export Land–has reached its peak in oil production. Assume domestic users consume half of all the oil produced in Export Land at the moment; assume a 5 percent annual decline rate for production; and assume a 2½ percent annual increase in domestic consumption. The result is that Export Land reaches zero exports in an astonishingly short nine years
(6 March 2009)
OPEC: World will pay for low oil prices by 2013
Bloomberg News
OPEC, the supplier of 40 percent of the world’s crude oil, said low prices may lead to a supply crunch by 2013 and rejected consumers’ arguments that cheap oil will help the world economy to recover.
“If the current low-price environment persists, this short- term relief may not translate into long-term gains,” OPEC Secretary Abdalla el-Badri said in an e-mailed statement today. “The failure of the industry to invest will result in a supply crunch by 2013 and beyond.”
Badri was responding to Nobuo Tanaka, the executive director of the International Energy Agency, who was cited in yesterday’s Financial Times as saying the global economy would get the equivalent of a $1 trillion stimulus if oil prices stayed at $40 a barrel this year. The IEA advises 28 oil importing nations on energy policy.
(6 March 2009)
The Price of Oil: If it’s Broken, Why Not Fix It?
Dan Badger, The Oil Drum
The price of oil is too important to be left to market forces. Since the early 1970s, the world oil market has repeatedly failed to send price signals that allocate economic resources efficiently. Governments of oil-importing nations should correct this market failure by fixing oil prices in internal markets at target levels high enough to set in motion technological and structural changes in the way their economies use oil and gas, while incentivizing increased domestic production. The result will be steadily declining imports, and greatly increased certainty for decision-makers in the internal oil and gas markets. The policy tool for achieving this is simple: an excise tax on oil imports equal to the difference between the target price and the prevailing world market price. For political reasons, it would be expedient to combine this with a windfall revenue tax to confiscate domestic producer revenue above the target price.
What Is Broken
Unlike democracy, the free market is not an end in itself, but a means to achieving economic efficiency. When a market fails to do this, as many often do, it must be fixed by government. The whipsaw prices generated by oil market forces between July 2007 and December 2008 have drowned out with noise any meaningful signals that prices may be trying to send to guide decisions by individuals and businesses about what to consume and how to invest. And it is not only short-term prices that are being whipped. Here is how the futures market priced crude oil for delivery in July 2012 at different times over the last 20 months:
Dan Badger, whose Oil Drum name is badgerd. Dan has worked as a policy analyst at the US Department of Energy and at the IEA. He is currently involved with independent power and renewable energy projects in Europe, working for Babcock and Brown in London.
(5 March 2009)
