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Wall St and peak oil
Kate Mackenzie, Financial Times
One of the enduring lines about peak oil is that authorities keep it a secret because there would be some kind of financial havoc if it were revealed. A recent example is a claim that Steven Chu, US energy secretary:
“… knows all about peak oil, but he can’t talk about it. If the government announced that peak oil was threatening our economy, Wall Street would crash.”
Is it really possible that oil traders, investors and analysts haven’t heard of peak oil?
Or that they have decided to ignore it altogether?
First, peak oil is hardly shunned by the financial world; just Google ‘peak oil funds’ to see how many investment managers are basing their strategy around this.
… Another point is Opec itself. The cartel insists it needs to see oil at between $70 and $80 a barrel to guarantee adequate investment in new supplies. Yet for the most part, Opec members can reap a profit on far less than this (although the price levels required to satisfy their domestic budgetary needs is another matter).
But if the market prices oil at the cost of the most expensive barrels – such as those from say, tar sands in Canada – why not take that price? What incentive does any Opec member have to provide more reassurance about its supplies? Meanwhile Opec itself seems genuinely concerned that oil demand itself will fall away.
None of this is to say that increasingly scarce and difficult to obtain oil won’t affect markets and the wider economy. And large parts of the analyst community have missed other looming problems, like the 2007-08 subprime crisis. But the likelihood of Wall Street being completely blindsided by oil supply problems seems remote.
(15 July 2010)
Kate Mackenzie is one of the few mainstream reporters regularly covering peak oil. Cheers!
The cited quote is from an article by Matthieu Auzanneau at Energy Bulletin: When the U.S. energy secretary spoke of “peak oil” … -BA
BP And The peak: Delusions Of Oil Grandeur Persist
Brendan Barrett, OurWorld 2.0 (United Nations University )
The BP oil spill in the Gulf of Mexico may have led many to believe that there are vast supplies of oil under the ground. This is, in part, true. However, the daunting reality is that the remaining oil reserves are located in places from which it is exorbitantly expensive to extract.
… So why are people unaware? Are they being misinformed? The sad irony is that despite BP’s failure to cope effectively with the oil spill, we look to this same discredited company as a credible source of information on the state of world energy. As BP’s 2010 State of the World Energy report shows, as you would expect during an economic recession, global oil consumption declined by 1.2 million barrels per day or by 1.7% between 2008 and 2009.
Well, that sounds like relatively good news doesn’t it, especially if your goal was to conserve this precious resource for future generations? Well, maybe not for future generations, but at least for another 40 years, at current rates of consumption. However, solar entrepreneur Jeremy Leggett in the Guardian has rightly criticized this claim from BP that we have 40 years of oil remaining as “dangerously complacent”.
… In the United States, until this year, the Energy Information Agency appeared unmoved by peak oil concerns. However, according to Steven Kopits at the Energy Bulletin, the 2010 International Energy Outlook has shifted from the previous forecasts of oil supply abundance to a new projection of a decade of stagnation. He argues that “the EIA is expecting the oil supply to be essentially flat for the rest of the decade. The supply will creep up from 86 mbpd today to approximately 92 mbpd to 2020, but that is not much growth”.
This shift to rather more pessimistic forecasts is a new phenomenon and suggests that we are being prepared for further bad news to come in the near future.
However, it is encouraging to see movement in unexpected quarters, such as Lloyds Insurance and Chatham House’s June 2010 publication of a white paper entitled Sustainable Energy Security. Over at Transition Culture, Rob Hopkins states that the report’s “conclusions are striking, indeed quite extraordinary” because they recognize the need for businesses to prepare for the transition towards a low carbon economy while at the same time coping with volatile fossil fuel markets.
The report argues that an oil supply crunch is likely in the short-to-medium term with profound consequences for the way in which businesses function today. It encourages businesses to move quickly to “reassess global supply chains and just-in-time models, and increase the resilience of their logistics against energy supply disruptions”.
Brendan Barrett joined the United Nations University in 1997 and heads the Media Studio. He has been working on conservation issues since 1984 and is an environmental planner by training. He uses the web and information technologies as a means to communicate, teach and undertake research on environmental issues.
(14 July 2010)
Optimism, Harsh Realism, and Blind Spots—10 years later
Staff, ASPO-USA
Ten years ago, energy analyst Steve Andrews challenged widely respected energy guru Amory Lovins via email for what Andrews thought was an overly optimistic vision-about coal consumption trends, evolution in the auto industry, future world oil production, etc.-articulated in the Rocky Mountain Institute’s Spring 2000 newsletter. RMI published the subsequent email exchange at http://www.rmi.org/Content/Files/RMI_SolutionsJournal_FallWin00.pdf in the fall of 2000; most of it is reprinted below, with a few updated facts. Ten years later, read it for the blind spots everyone had.
… What’s the take-home here? Is it that Lovins, who really is a genius, was bested by Andrews, who confesses that he’s a couple slices short of a full loaf? Even if true, that’s irrelevant. What matters is that nearly all of us have blind spots and natural proclivities that prevent us from anticipating, seeing or acknowledging shifting trends, even shifting megatrends just 10 year out. Lovins and Worldwatch were wrong about coal. Lovins was wrong about the 2010 US car market, will likely be wrong about oil. Andrews badly missed the current shale gas trend. IHS has repeatedly blown their rate and price of new supply forecasts. M. King Hubbert knew he was wrong about natural gas but didn‘t know why. The US EIA has been terrible at long-term oil forecasting. What’s your blind spot?
(12 July 2010)
Kicking the Oil Habit
Mark Hertsgaard, The Nation
… Anyone who is serious about the United States kicking its oil habit in the wake of the BP disaster must confront the realities of Louisiana, a state whose economy, politics and self-image have been saturated in oil for more than a century. They must have an answer for Captain Pete and other locals who are cursing BP even as they wonder how they will support their families if the oil and gas industry—widely regarded as the source of the best-paying blue-collar jobs in Louisiana—goes under. “We see the same reaction from people in the coal country of Appalachia and the timber lands of the Pacific Northwest,” says Michael Brune, executive director of the Sierra Club. “They may criticize the corporations doing the resource extraction, but they still want the extraction to continue because it’s the only jobs they know. The only way to approach these folks with integrity is to offer them a prosperous alternative. If you support a drilling moratorium, which the Sierra Club does, you also have to support a massive shift toward green jobs.”
Plotting a green energy future for Louisiana, however, has been too daunting a task for most environmental groups. “Our side hasn’t made a blueprint for Louisiana because this state is seen as so pro–oil and gas,” observes Jerome Ringo, a former Louisiana oil worker who has been chair of the National Wildlife Federation and president of the Apollo Alliance. “To be honest, I doubt Louisiana will ever get off oil completely. But we do need to diversify our energy mix. We need to think about where our state goes ten years from now and invest in the green jobs of the future.”
But Louisiana can surprise you. Who knew that this petrostate boasts by far the strongest solar tax credit in the country?
… Matthew Simmons, an investment banker, has operated at the highest levels of the oil industry for more than thirty-five years. … Simmons’s book, Twilight in the Desert, made him a leading proponent of “peak oil”—the theory that humanity has now extracted half of the earth’s oil and large future production increases are unlikely. At first derided as fringe, peak oil is now an open secret among specialists.
… Simmons says the BP disaster demonstrates that “we’re out of viable oil in the Gulf of Mexico.” The remaining oil can be reached only with “ultra-deep vertical wells” that extend more than 18,000 feet under the sea floor—even deeper than BP was drilling.
…Transforming Louisiana’s energy system is not an impossible dream but an economic and environmental imperative, not least because the state’s oil is fast disappearing. Louisiana can’t turn green overnight, which is all the more reason to get started right away. It’s only fair that the federal government assist in this task, for the nation as a whole has demanded the oil and gas Louisiana has supplied all these years. But primary leadership belongs at the state and local levels, shared among activist, business and political figures engaged in constructive dialogue with one another and the public at large. The solar tax credit and other innovations already undertaken show there is an appetite and capacity in Louisiana for blazing a new path.
Winning over regular people like Captain Pete and his dock mates is essential. That requires plain talk that respects and broadens local sensibilities, as well as bold actions that deliver concrete benefits—in a word, jobs.
(15 July 2010)
