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Klare: It’s Official — The Era of Cheap Oil Is Over
Michael T. Klare, Tom Dispatch
Energy Department Changes Tune on Peak Oil
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… Every summer, the Energy Information Administration (EIA) of the U.S. Department of Energy issues its International Energy Outlook (IEO) — a jam-packed compendium of data and analysis on the evolving world energy equation. For those with the background to interpret its key statistical findings, the release of the IEO can provide a unique opportunity to gauge important shifts in global energy trends, much as reports of routine Communist Party functions in the party journal Pravda once provided America’s Kremlin watchers with insights into changes in the Soviet Union’s top leadership circle.
As it happens, the recent release of the 2009 IEO has provided energy watchers with a feast of significant revelations. By far the most significant disclosure: the IEO predicts a sharp drop in projected future world oil output (compared to previous expectations) and a corresponding increase in reliance on what are called “unconventional fuels” — oil sands, ultra-deep oil, shale oil, and biofuels.
So here’s the headline for you: For the first time, the well-respected Energy Information Administration appears to be joining with those experts who have long argued that the era of cheap and plentiful oil is drawing to a close. Almost as notable, when it comes to news, the 2009 report highlights Asia’s insatiable demand for energy and suggests that China is moving ever closer to the point at which it will overtake the United States as the world’s number one energy consumer. Clearly, a new era of cutthroat energy competition is upon us.
Peak Oil Becomes the New Norm
As recently as 2007, the IEO projected that the global production of conventional oil (the stuff that comes gushing out of the ground in liquid form) would reach 107.2 million barrels per day in 2030, a substantial increase from the 81.5 million barrels produced in 2006. Now, in 2009, the latest edition of the report has grimly dropped that projected 2030 figure to just 93.1 million barrels per day — in future-output terms, an eye-popping decline of 14.1 million expected barrels per day.
Even when you add in the 2009 report’s projection of a larger increase than once expected in the output of unconventional fuels, you still end up with a net projected decline of 11.1 million barrels per day in the global supply of liquid fuels (when compared to the IEO’s soaring 2007 projected figures). What does this decline signify — other than growing pessimism by energy experts when it comes to the international supply of petroleum liquids?
Very simply, it indicates that the usually optimistic analysts at the Department of Energy now believe global fuel supplies will simply not be able to keep pace with rising world energy demands. For years now, assorted petroleum geologists and other energy types have been warning that world oil output is approaching a maximum sustainable daily level — a peak — and will subsequently go into decline, possibly producing global economic chaos. Whatever the timing of the arrival of peak oil’s actual peak, there is growing agreement that we have, at last, made it into peak-oil territory, if not yet to the moment of irreversible decline.
Until recently, Energy Information Administration officials scoffed at the notion that a peak in global oil output was imminent or that we should anticipate a contraction in the future availability of petroleum any time soon. “[We] expect conventional oil to peak closer to the middle than to the beginning of the 21st century,” the 2004 IEO report stated emphatically.
… New Powers, New Problems
The IEO report hints at other geopolitical changes occurring in the global energy landscape, especially an expected stunning increase in the share of the global energy supply consumed in Asia and a corresponding decline by the United States, Japan, and other “First World” powers. In 1990, the developing nations of Asia and the Middle East accounted for only 17% of world energy consumption; by 2030, that number, the report suggests, should reach 41%, matching that of the major First World powers.
All recent editions of the report have predicted that China would eventually overtake the United States as number one energy consumer. What’s notable is how quickly the 2009 edition expects that to happen. The 2006 report had China assuming the leadership position in a 2026-2030 timeframe; in 2007, it was 2021-2024; in 2008, it was 2016-2020. This year, the EIA is projecting that China will overtake the United States between 2010 and 2014.
It’s easy enough to overlook these shifting estimates, since the reports don’t emphasize how they have changed from year to year. What they suggest, however, is that the United States will face ever fiercer competition from China in the global struggle to secure adequate supplies of energy to meet national needs.
Michael T. Klare is a professor of peace and world security studies at Hampshire College in Amherst, Massachusetts, and the author, most recently, of Rising Powers, Shrinking Planet: The New Geopolitics of Energy (Henry Holt). A DVD of the documentary film based on his previous book, Blood and Oil, is available by clicking here.
(11 June 2009)
BP: The centre of gravity in the global energy market has changed and we need to wake up
Tony Hayward, Telegraph (UK)
Tony Hayward, the chief executive of BP, explains why 2008 is likely to go down in history as a turning point for the way in which the world consumes and produces energy.
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… 2008 was actually a ‘year of two halves’. In the first half, riding the strongest stretch of world economic growth in a generation, prices of all forms of energy – and most other commodities for that matter – continued their rapid increase, which began in 2004.
In the second half, along with the world economy, global energy demand and hence prices deteriorated sharply. Growth in production exceeded growth in consumption for all fossil fuels last year.
This gap between production and consumption has continued into 2009. And the resulting build-up of high inventories and spare capacity is an indication that markets are still unsettled.
Volatility has also led to inevitable questions about the ability of the energy industry to invest in new production. The shift of demand towards the non-OECD countries makes that an especially vital consideration because it is in those countries that the pursuit of prosperity is most acute. And, however much we may wish it otherwise, that legitimate pursuit means continuing higher energy consumption.
Whatever achievements are made in alternative energy, fossil fuels are almost certain to remain the dominant source of energy, well into the future.
(10 June 2009)
Oil Heading to $40; Natural Gas Better Bet: Analyst
CNBC
Oil prices are heading lower — possibly to below $40 a barrel again in the coming months —while natural gas will be the best energy bet for investors, analyst Peter Beutel told CNBC.
With prices for US light, sweet crude eclipsing the $70 mark and raising worries that gasoline prices could be heading towards their peak last summer, Beutel said investors would be better off betting against any big moves higher.
… For the longer term he sees oil prices stabilizing until the middle part of the next decade, when the “peak oil” effect will kick in, a term used to describe the point at which the maximum amount of oil production is reached and begins to decline, setting off what economists fear will be a severe price spiral.
(11 June 2009)
