May 05, 2005
The View from the Top
Strange as it may seem, the world economy has become accustomed to the idea of 50$ crude. Merrill Lynch on CNN money, had the following to say today:"...we believe that spot WTI crude oil prices will remain over $50 per barrel, despite the bearish signal of the super contango," ...
"Going forward, we expect global oil demand growth to decelerate modestly in line with a slowing global economy, but higher long-dated prices and infrastructure bottlenecks will likely combine to support spot crude oil prices"
If you watch the market regularly, as I have started to in a somewhat ghoulish manner, it becomes difficult to put current prices in perspective. Most sites seem to carry short term charts (typically monthly and daily), which I suppose suit investors, but don't give you much of a sense of our current situation. I managed to find the following chart on Oilnergy (does anyone else find that domain name amusing?)
Are we approaching the eye of the storm?
Posted by kitsune at 05:54 PM | Comments (2) | TrackBack
May 04, 2005
Maori Party Co-Leader on Peak Oil
Tariana Turia
Maori Party Co-Leader
Scoop are running a press release from Co-leader of the Maori Party, Tariana Turia, acknowledging the Maori Party's commitment to peak oil issues and giving an overview of their policy.
No revelations here, but it's good to see a party other than the Greens taking an active interest in preparing for the coming energy crisis. Hopefully this will stimulate more debate in parliament.
Labour, despite recognising the need to make immediate changes, have been far too quiet. I suspect they aren't willing to broach the subject this close to an election, fearing that it will hurt them at the polls... which is cowardly, and sadly, not surprising.
Posted by kitsune at 09:55 PM | Comments (0) | TrackBack
April 17, 2005
If the Stone Age had run out of rocks...
An opinion piece by Owen McShane has recently been featured in the New Zealand Herald suggesting that Peak Oil is not an issue we should be concerned about. How I wish that were true.
McShane's argument is essentially that the market will provide, and technological solutions will avert any difficulty dwindling supplies may create. There are a number of flaws in his argument that I would like to address.
"Much of the oil in known reserves needs a higher price to make it worth extracting. Some is "taxed" by environmental restraints. Now that prices are high, the oil companies are exploring again. Governments are providing the appropriate incentives."
Oil companies have never stopped investing in exploration which has been in steady decline since 1962 (see chart). We are very good at finding oil now using 3d seismic imaging techniques. No amount of technological improvement or further investment of funds is going to create more oil.
Oil Discovery: (3 Year Average, Past and Projected)
"World population collapse is just around the corner - let’s say 2050. This coupling of population decline with increased efficiency will compensate for increases in energy use."
The IEA predicts that global peak production will occur around 2030. It should be noted that this is an optimistic forecast, and a number of well respected geologists suggest that the peak will come between 2005 and 2012. Given both the best and worse case scenario, a theoretical population decline around 2050 seems irrelevant.
Once we have reached peak oil, production will drop by 3-6% per year, every year. Mr. McShane should be reminded that it only took a 5% drop in supply to cause the 1970s oil crisis. The situation in the 70s was the result of an artificial shortage. The permanent price increases and inevitable shortages to come unfortunately are out of our hands and are the result of resource constraints, not politics.
"Oil is only one source of energy. If it gets truly expensive, the future will still be awash with energy because so many new sources are waiting in the wings for oil to get more expensive. New energy sources are all around us."
I would be very interested to know what those alternative sources of energy are, because as it stands at the moment, nothing has the EROEI of oil. We have no alternative technology capable of replacing oil. Hydrogen, bio-diesel, ethanol are all net-losers, requiring a greater initial input of energy than they return.
It should also be considered that none of these technologies are truly independent of oil. It takes large amounts of oil and other scarce resources to locate, mine and transport the raw materials necessary to build solar panels, windmills, and nuclear power plants. Furthermore, if peak oil is imminent, we do not have the infrastructure to support an alternative fuel, and it could take decades to establish one.
"The Alberta oil sands contain the equivalent of 1.6 trillion barrels of oil, more than all of the world oil reserves combined. A higher price will turn this resource into a reserve."
The EROEI for oil is 30 to 1, whereas oil sands are around 1.5 to 1.
Furthermore, oil sands are projected to only produce 2.2 million barrels per day by 2015. We currently need 83.5 million barrels per day, and are projected to need 120 million barrels per day by 2020.
Your utopian vision of the future sounds lovely Mr. McShane, and I would so like to visit. The reality of the situation is considerably bleaker, and we and doing practically nothing to address it.
Posted by kitsune at 02:37 AM | Comments (5) | TrackBack
April 13, 2005
Bank says Saudi's top field in decline
Another voice has surfaced, supporting Matt Simmons view that Gharwar has hit peak and is in decline. If this is the case, we should expect to see the market respond pretty dramatically soon.
The Saudis are of course denying this.
Posted by kitsune at 02:41 AM | Comments (0) | TrackBack
April 11, 2005
New Zealand Government Recognises Need for Transition
On Saturday evening, I emailed Pete Hodgson, Minister for Climate Change, and Trevor Mallard, Minister of Energy, after reading the announcement from the IMF that we are experiencing a permanent oil shock.
Below you'll find my email, and Mr. Hodgson's reply.
and Mr. Hodgson's reply:Dear Mr. Hodgson and Mr. Mallard,
These appear to be very significant events:
“The shock we see is a permanent shock that is going to continue... and countries need to adjust to that,” said David Robinson, deputy IMF chief economist.
coupled with thisSurely, some radical changes to our transportation and energy policy are in need.
kind regards,
Bayard Randel
Dunedin
Dear Bayard,
I Agree. The transition needs to begin soon, and policy settings will change progressively,starting soon.
Regards
Pete Hodgson MP
Dunedin North
This is a very encouraging response, and I feel hopeful that our government will give the issue the attention that it so desperately needs.
Posted by kitsune at 05:00 PM | Comments (0) | TrackBack
Saudi Oil
The Oil Drum, which is a rather swell blog if you've not yet stumbled across it, has posted an item about declining production in Saudi. The general consensus around Saudi reserves is that they are in decline, most fields having hit peak production some time ago. Yet despite this, the Saudi minister of Petroleum and Mineral Resources, Ali Al-Naimi, had the following to say recently:"There is a possibility that the Kingdom will increase its reserves by around 200 billion barrels, either through new finds or by increasing what it produces from existing fields."
"These huge reserves enable the Kingdom to remain a major oil producer for between 70 and 100 years, even if it raises its production capacity to 15 million barrels per day, which may well happen during the next 15 years," he said.
This seems to fly in the face of our knowledge of the logarithmic decline of production. Is Saudi Arabia an anomaly, or is this just bullshit?
Keep an eye on OPEC - we'll know soon enough.
Posted by kitsune at 12:12 PM | Comments (0) | TrackBack
April 09, 2005
ChevronTexaco's CEO banking on peak oil situation
This to my mind is a very significant event.
An excerpt from David Lazarus' article at the SF Chronicle:
There's been a lot of ink spilled this week about the risk ChevronTexaco's chief exec, David O'Reilly, has taken in paying about $16.4 billion for rival Unocal and its oil resources.
Because Unocal's stock has soared 75 percent over the past year, the thinking goes, ChevronTexaco could find itself with a white elephant on its hands if currently sky-high oil prices end up coming back to earth.
Well, I'm prepared to say this much: O'Reilly isn't stupid. He knows more than most people about world oil markets.
So if the head of San Ramon's ChevronTexaco is prepared to gamble more than 16 billion bucks on oil prices staying at stratospheric levels, I'm ready to give him the benefit of the doubt.
And reading between the lines, that means only one thing.
Peak oil.
We're basically there.
Posted by kitsune at 03:00 AM | Comments (2) | TrackBack
April 07, 2005
IEA report: Saving Oil in a Hurry
There appears to have been some hoorah surrounding the release of the IEA draft document entitled "Saving Oil in a Hurry". A number of sources have suggested that the existence of this document is tantamount to an admission of an impending Peak Oil scenario by the IEA.
Having tracked down the document, and read it, this is clearly not the case. Given that the evidence for an imminent peak is growing, this is an unfortunate realisation in some respects. The document deals with mitigating short term drops in supply, and certainly is not recommending adoption of these strategies now. Given the volatile price of crude at the moment, it is not surprising that the IEA have prepared this report.
Pete Hodgson's office was correct in stating:
"The article relates to a conference being held on contingency planning, and the report from that conference. The IEA is not recommending that these measures be implemented now. New Zealand officials attended the conference."
"The purpose of the conference is to help countries with their contingency planning for future emergencies, such as a major supply disruption or war in the Middle East. Under IEA rules, all countries are required to have plans in place for what they would do in the event of an oil supply disruption."
I've made the document available from nocturne, as it appears that the IEA have removed the document from their site.
Posted by kitsune at 01:57 PM | Comments (2) | TrackBack
April 01, 2005
NZ Government position on Peak Oil
Pete Hodgson
Labour MP, Dunedin North
I recently mailed the former minister of energy, Pete Hodgson (I chose to mail him, rather than the current minister Trevor Mallard, as Mallard has not held the portfolio terribly long, and is likely to be less informed), about what I consider the most important issue facing modern man - the impending decline of global oil production.
I've included his response, and my subsequent response below. The statement “The Government is however not accepting these views [in reference to the IEA's prediction of peak ~2030 - Ed.] as gospel.” is encouraging, but I am still concerned that we are not acting swiftly enough.
At least the issue is out in the open, and government is discussing it.. that's more than can be said for most countries, most notably the U.S., who have the most to lose.
Dear Bayard Randeland my reply,
Thank you for your email of 16 March 2005 regarding global oil supplies.
The possibility of global oil supply peaking in the near future is a contentious issue. Certainly nobody would disagree that oil is a non-renewable resource that will run out one day, but there is considerable debate about when that one day will be. You mention sources of information that forecast an oil crisis as early as 2007 and 2010. Having sourced this information, you are no doubt aware of the arguments for that point of view. It should be noted that these are amongst the most pessimistic views of world oil supplies and there are opposing arguments based on revised estimates of existing economic reserves, the expectation of new discoveries still to be made, advances in production technology and the addition of other sources such as Canadian oil sands.
The International Energy Agency (IEA) is considered to be one of the leading authorities on world energy projections and energy supply issues. In their 2002 World Energy Outlook, the IEA foresee enough oil to comfortably meet demand to 2030. As another example, the US Department of Energy using data from the US Geological Survey, estimates that oil production is likely to peak sometime between 2021 and 2067, with probability highest around 2037.
The Government is however not accepting these views as gospel. The Ministry of Economic Development carefully considers a wide range of evidence and information but it should be recognised that mainstream opinion is that oil is not likely to peak this decade. Keep in mind that after the 1970's oil shocks, predictions were for oil to run out by the year 2000. Further information on the IEA and the World Energy Outlook can be found at www.iea.org.
Because of the highly technical nature of estimating global oil reserves, it is not an appropriate task for the Ministry of Economic Development to forecast global oil supply. Instead, the Ministry aims to generally follow the views expressed by the IEA, the US Energy Information Administration (EIA) and OPEC. At the same time, the Ministry constructs alternative yet plausible scenarios for investigation.
The Ministry of Economic Development's New Zealand Energy Outlook to 2025 uses supply and demand modelling to produce scenarios of future energy supply, demand, prices and emissions. Further information on the New Zealand Energy Outlook can be found at www.med.govt.nz/ers/en_stats/outlook/index.html.
Thank you for your interest in this subject. I have also attached a copy of a speech I gave to the 2004 Hopkins Lecture in Christchurch, which provides a brief overview of the government's energy planning for New Zealand, including some thoughts on oil supplies.
Yours sincerely
HON PETE HODGSON MP for Dunedin North
Dear Mr. Hodgson,Thank you kindly for your detailed and considered reply. I am aware that the peak scenarios proposed by Campbell and Defeyes (2005-2012), although plausible, are pessimistic. I am pleased to hear that you are not accepting the IEA predition as gospel. Many analysts are starting to recognise that Proven Reserves, are rarely proven - consider Royal Dutch Shell's writedown, cutting reserve life from 13.4 to 10.6 years.
I would hope that we would have the prudence to consider the precautionary principle, especially as the oil required for a 2030 peak has yet to be recovered, and remains an unknown.
kind regards,
Bayard Randel
Dunedin
Posted by kitsune at 04:19 PM | Comments (0) | TrackBack
Mr Vidal lays it out
“There is not one human problem which could not be solved if people would simply do as I advise.”
- Gore Vidal
I've long been a fan of Gore Vidal's writing, having been fortunate enough to be thoroughly confused by his marvellous Myra Breckinridge at a tender age. City Pages have posted a great interview with Vidal, focusing on the corporatisation of America and the absence of any real politics in the American political system. Vidal seems to be one the few sane voices of dissent today, in an increasingly bewildering world.
Many thanks to Steven Lagavulin over at deconsumption for the link.
Posted by kitsune at 12:30 PM | Comments (0) | TrackBack