"Those disbelievers who feel the need to ridicule the peak oil story ought
consider this. If by hallucination or some stretch of the imagination we
turn out to be wrong then we merely look silly. However if the detractors
are wrong, if the fountain of eternal energy, whatever that might be, is
not found soon then the western civilisation we all know and love,
contingently reliant upon oil to feed, clothe, house and medicate itself
is about to end."
Published on 14 Mar 2005 by EnergyBulletin.net.
The Endless Supply of Oil and Other Fairy Tales
by Powerless New Zealand Press Release
PowerLess New Zealand
Media Release for Immediate Use
15 March 2005, Wellington
The rigour of science requires that we distinguish well the undraped
figure of nature itself from the gay-coloured vesture with which we
clothe it at our pleasure.
Heinrich Hertz, 1895
Common bloviated pigeon-chesting by those that believe our drive-by
fantasyland will continue ad-infinitum include the following claims;
• Ho hum, heard it all in the 70’s
• Peak oil = chickenlittlism
• The stone age didn’t end because we ran out of stone
• OPEC could simply pump more oil if they wished
• The world is awash in oil
• The market will provide
Obvious logical fallacies aside the final statement has some credibility;
we suspect the market will provide with rickshaws and bicycles being high
on the demand list.
The point is that the mutterers of such slaver never seem able to offer
any coherent argument as to how it is that the price of oil is 400% higher
than it was in 1999. Nor can anyone point to the seemingly endless
reserves [1] that are said to exist to meet ballooning demand. Certainly
in regard to supply and demand within the oil market the empirical facts
speak for themselves. None of the hubristic rants inclusive of any of the
above bullet points or not, have yet been able to cool the market back to
US$11bbl.
Further, all new production due to come online over the next year or two
is likely to be offset by existing depletion running close to 2Mbpd per
year (ExxonMobil confirm their fields are depleting at 4-6% per year)
combined with existing strong demand growth [2].
Although the peak oil model is instrumentally reliable, it has been
verified in all oil field production data most visibly in fields that are
now in decline since it’s inception in the US in 1971, the actual peak oil
date to some extent is largely irrelevant once available supply is
surpassed by demand. The debate whether the peak oil model is “true” or
“real” or not is orthogonal to the present demand/supply issue. You can
happily ignore peak oil at the moment, but you can’t ignore the
probability that demand is outstripping supply.
Nevertheless it is a simple observable fact that the peak oil model is
descriptively accurate in regard to the oil production cycle. Normative
appeals to market principles or human ingenuity do not change geological
facts. Furthermore advances in technology serve only to exploit oil
reserves at a quicker rate but surely depleting resources at a quicker
rate does not solve the depletion problem. The market may well provide, we
can be sure it won’t be providing cheap oil, even the flat-earthers are
beginning to reluctantly concede this point.
The recent “Hirsh Report”[3] to US Department of Energy describes the
economic, social and political costs of peak oil as unprecedented. Hirsh
in fact questions the ability of the market to provide adequate solutions.
The report looks at the Peak Oil problem from a risk management
perspective, Hirsh contending that dealing with Peak Oil will cost
trillions of dollars and require years of intense effort. Transitioning to
a more fuel-efficient national automobile fleet for example is expected to
take more than a decade.
Yet in respect of Peak Oil, from our Government we hear a divine silence.
We go about building more roads and infrastructure, we make predictions
about how well the economy will do next year, and the year after. The
Government has ignored peak oil’s warning signals; many other political
parties are equally ignorant.
According to recent analysis on Aljazeera’s web site (Oil Prices Confound
Experts, Adam Porter) industry analysts and other “experts” are befuddled
by the fact that the price hasn’t fallen. "OPEC isn't running fast enough
to meet this train of demand that's growing without any sign of a
slowdown," said Gal Luft, executive director of the Institute for the
Analysis of Global Security in Washington.
The International Energy Agency (IEA), bastion of positivism, beholder of
distended technological hubris are showing signs of worry. This warning
was issued by the IEA last Friday, “The reality is that oil consumption
has caught up with installed crude and refining capacity," the Paris-based
agency said. "If supply continues to struggle to keep up, more policy
attention may come to be directed at oil demand intensity in our economies
and alternatives”[4]. This revelation comes on the back of upward demand
growth and downward discovery adjustments made by the IEA earlier this
year.
The typically ultra-optimistic IEA, panderer to neo-classic economic dogma
while powerless to do anything about oil price volatility, seem to be
suggesting that a crisis is almost upon us. If as Hirsh suggests
changeovers will cost (at least in New Zealand terms) many billions of
dollars and take a decade or so implement we are likely to see the
emergence of serious oil induced problems quite soon. Hirsh cites higher
oil prices and oil price volatility as advance signs of peak. The final
warning signals are now imminent.
Yet the cavalry is not appearing on the horizon. Evidence is emerging that
Saudi Arabia are simply unable to increase production. There have been
marked declines in monthly production figures from the peninsula since the
end of 2004. If this turns out to be the case and Saudi has peaked then
according to Matt Simmons [5] the world has peaked.
A similar scenario faces the FSU. Production figure declines have
persisted for several months running. It is progressively evident that
production increases both within OPEC and non-OPEC states will prove
increasingly difficult to maintain. The limits are being reached.
No, the Stone Age didn’t end because we ran out of stone; we found
something better, we replaced stone with iron but this transition took
centuries. This time according to Dr Hirsh we have about a decade if we
are lucky and a replacement for oil is yet to be identified.
Those disbelievers who feel the need to ridicule the peak oil story ought
consider this. If by hallucination or some stretch of the imagination we
turn out to be wrong then we merely look silly. However if the detractors
are wrong, if the fountain of eternal energy, whatever that might be, is
not found soon then the western civilisation we all know and love,
contingently reliant upon oil to feed, clothe, house and medicate itself
is about to end.
[1]. In 2004 the total world discovery of oil was 7Gb (a total of 3 months
or so supply on the world market). 2Gb were in deep-water finds and the
cost of exploration alone (not including development and production)
exceeded the current net present value of the oil discovered. The world
consumed 30Billion+ barrels of oil in 2004. Economies of scale are
disappearing as the oil found is spread across greater numbers of
increasingly smaller fields. Source – Association for the Study of Peak
Oil and Natural Gas, Newsletter #50, February 2005.
[2] IEA report demand growth running at 2.2%, other reports suggest 3%+ is
a more realistic figure.
[3]. The Hirsh Report Executive Summary (and link to the full report) is
available at
www.energybulletin.net/4638.html
[4]Financial Times, Mar 11, 2005.
news.ft.com/cms/s/f20cfb8a-920d-11d9-bca5-00000e2511c8.html
[5] Matt Simmons, Founder and Chairman of the worlds largest energy
investment bank, Simmons and Co. International. Advisor to the 2001
Bush-Cheney Energy Task Force.
Steve McKinlay for
Powerless NZ
15 March 2005
PowerLess NZ is a growing group of scientists, energy analysts and
concerned citizens whose principle objectives are to alert both Government
and the general public to New Zealand’s looming energy crisis. Our aim is
to support development of renewable energy resources at both a private and
public level, as well as encourage a firm move away from dependence upon
fossil fuels.
More information about global peak oil and resource depletion can be found
at
www.oilcrash.com and ontic.blogspot.com
~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
Another great press release from Powerless NZ. I'd hazard that Hubbert and
his followers' methods aren't as pinpoint accurate as this article might
give the impression that they are. But that said of course they are
probably the most powerful predictive tools for oil production available.
-AF
