Thursday, February 23, 2012

Peak Oil Is Real And It's Here

The claims of Peak Oilers seem to be coming true. The price of gas is soaring even in a dismal economy that just keeps getting worse:
The headlines of major newspapers and TV networks this week have been dominated by rising gas prices.

Drivers across the country have shared their stories on the cost - with many already paying more than $4 a gallon at the pump. There have even been reports of gas prices rising at a rate of 10 to 15 cents in a matter of hours. The swiftness at which those gas prices continue to climb was crystal clear Wednesday night during the broadcast of ABC News’ “World News with Diane Sawyer.”

As ABC News’ Cecilia Vega introduced her piece on high gas prices, the sign at the downtown Los Angeles gas station behind her showed the price of regular gas at $4.99 a gallon. However when the piece concluded nearly two minutes later the price of regular gas had jumped 10 cents to $5.09 a gallon.

Even Vega seemed truly surprised to see such a drastic change in such a short period of time, telling Sawyer that “it is almost too unbelievable to believe.”

“It went up 10 cents?” asked Sawyer, herself shocked at what just had occurred.

“Ten cents during that two minutes while we were on the air,” confirmed Vega.
video platformvideo managementvideo solutionsvideo player  (my note - from the comments it seems like the increase was staged, which wouldn't surprise me. Still, the substance of the report is accurate.)

If you think there's any way this is going to form a coherent societal response, I urge you to read through the comments, which are probably typical of the national consciousness. You hear the usual sniping beteween the Republicans and Democrats, with the majority of commentors blaming Obama for gas prices (of course they'd be cheaper under President McCain, *sigh*), with the usual barely literate spelling, and the usual blaming the government and calls to abolish the EPA. A minority blames the oil companies and speculators. And so it goes. This really sounds like a country that's got it all figured out, right? I'm sure "liberals" and "conservatives" will continue to be at each other's throats as gas prices continue to soar, and the economy continues to detariorate. One of the few intelligent responses to the article is below:

I began driving in 1970.
Gas was 25 cents a gallon.

I could fill my tank for 5 dollars.
I was earning 2 dollars per hour.

That means I had to work for 2.5 hours to fill up.

Today – gas is 4 dollars a gallon.
To fill my tank costs 80 dollars.

If I earn $32.00 dollars per hour, I have to work for 2.5 hours to full my gas tank.

BUT – I don’t make $32.00 per hour. Not even $22.00 per hour. Lots of folks are making $10 or $12 or $15 per hour.

Where did the equation go wrong?

Grist covers the fallacy of the anti-Obama commenters above: Why all promises to make gas significantly cheaper are fantasies:

Don’t miss the point at 1:55 when some reporter asks "Is the rise in gas prices the president's fault?" and the White House press secretary issues the appropriate response: a derisive laugh.

Bryan Walsh at Time is also on the case:

Recession depress economic demand, and when demand is depressed, fewer people drive -- which in turns leads the price of gas to fall like any other commodity would when demand falls. As the economy recovered and economic activity picked up -- both in the U.S. and elsewhere -- the price of gas rose as well. If future President Gingrich were to somehow be able to deliver $2.50-a-gallon gas, it would probably mean the economy had tanked again.
It's hard to understand why this isn't as ingrained in our national psyche as, say, the relationship between supply and demand. I mean, seeing as how that's exactly how the price of oil is determined. Are we really so insulated from news about the explosive economic growth experienced by billions of non-Americans in the past decade? Those people buy oil, too, and last time we checked, planet Earth isn't making any more of it.
And see this: Has America lost its drive? (Angry Bear).

This seems like a good time to put up this post I was working on a while ago documenting Peak Oil for my own (and reader's benefit), with some of the more significant and informative links I found. It's a bit raw, but there's always time to rework it later:

Let’s start with this tidbit from 2007:
World oil supplies are set to run out faster than expected, warn scientists
Scientists challenge major review of global reserves and warn that supplies will start to run out in four years’ time

Scientists have criticised a major review of the world's remaining oil reserves, warning that the end of oil is coming sooner than governments and oil companies are prepared to admit.

BP's Statistical Review of World Energy, published yesterday, appears to show that the world still has enough "proven" reserves to provide 40 years of consumption at current rates. The assessment, based on officially reported figures, has once again pushed back the estimate of when the world will run dry.

However, scientists led by the London-based Oil Depletion Analysis Centre, say that global production of oil is set to peak in the next four years before entering a steepening decline which will have massive consequences for the world economy and the way that we live our lives.

According to "peak oil" theory our consumption of oil will catch, then outstrip our discovery of new reserves and we will begin to deplete known reserves.

Colin Campbell, the head of the depletion centre, said: "It's quite a simple theory and one that any beer drinker understands. The glass starts full and ends empty and the faster you drink it the quicker it's gone."
Obviously, four years from 2007 is 2011. How’s that recovery going? The article continues:
In 1999, Britain's oil reserves in the North Sea peaked, but for two years after this became apparent, Mr Leggett claims, it was heresy for anyone in official circles to say so. "Not meeting demand is not an option. In fact, it is an act of treason," he says.

One thing most oil analysts agree on is that depletion of oil fields follows a predictable bell curve. This has not changed since the Shell geologist M King Hubbert made a mathematical model in 1956 to predict what would happen to US petroleum production. The Hubbert Curveshows that at the beginning production from any oil field rises sharply, then reaches a plateau before falling into a terminal decline. His prediction that US production would peak in 1969 was ridiculed by those who claimed it could increase indefinitely. In the event it peaked in 1970 and has been in decline ever since.

In the 1970s Chris Skrebowski was a long-term planner for BP. Today he edits the Petroleum Review and is one of a growing number of industry insiders converting to peak theory. "I was extremely sceptical to start with," he now admits. "We have enough capacity coming online for the next two-and-a-half years. After that the situation deteriorates."

What no one, not even BP, disagrees with is that demand is surging. The rapid growth of China and India matched with the developed world's dependence on oil, mean that a lot more oil will have to come from somewhere. BP's review shows that world demand for oil has grown faster in the past five years than in the second half of the 1990s. Today we consume an average of 85 million barrels daily. According to the most conservative estimates from the International Energy Agency that figure will rise to 113 million barrels by 2030.

Two-thirds of the world's oil reserves lie in the Middle East and increasing demand will have to be met with massive increases in supply from this region.
The German military did a study that was leaked warning of drastic consequeces of Peak Oil. Maybe that's why they're putting up solar and wind power as fast as they can:
The term "peak oil" is used by energy experts to refer to a point in time when global oil reserves pass their zenith and production gradually begins to decline. This would result in a permanent supply crisis -- and fear of it can trigger turbulence in commodity markets and on stock exchanges.

The issue is so politically explosive that it's remarkable when an institution like the Bundeswehr, the German military, uses the term "peak oil" at all. But a military study currently circulating on the German blogosphere goes even further.

The study is a product of the Future Analysis department of the Bundeswehr Transformation Center, a think tank tasked with fixing a direction for the German military. The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the "total collapse of the markets" and of serious political and economic crises.

The leak has parallels with recent reports from the UK. Only last week the Guardian newspaper reported that the British Department of Energy and Climate Change (DECC) is keeping documents secret which show the UK government is far more concerned about an impending supply crisis than it cares to admit.

According to the Guardian, the DECC, the Bank of England and the British Ministry of Defence are working alongside industry representatives to develop a crisis plan to deal with possible shortfalls in energy supply. Inquiries made by Britain's so-called peak oil workshops to energy experts have been seen by SPIEGEL ONLINE. A DECC spokeswoman sought to play down the process, telling the Guardian the enquiries were "routine" and had no political implications.,1518,715138,00.html

Lloyd's of London, the world's largest insurer, is also taking it seriously:

One of the City's most respected institutions has warned of "catastrophic consequences" for businesses that fail to prepare for a world of increasing oil scarcity and a lower carbon economy.

The Lloyd's insurance market and the highly regarded Royal Institute of International Affairs, known as Chatham House, says Britain needs to be ready for "peak oil" and disrupted energy supplies at a time of soaring fuel demand in China and India, constraints on production caused by the BP oil spill and political moves to cut CO2 to halt global warming.

The report the world is heading for a global oil supply crunch and high prices owing to insufficient investment in oil production plus a rebound in global demand following recession. It repeats warning from Professor Paul Stevens, a former economist from Dundee University, at an earlier Chatham House conference that lack of oil by 2013 could force the price of crude above $200 (£130) a barrel.

It also quotes from a US department of energy report highlighting the economic chaos that would result from declining oil production as global demand continued to rise, recommending a crash programme to overhaul the transport system. "Even before we reach peak oil," says the Lloyd's report, "we could witness an oil supply crunch because of increased Asian demand. Major new investment in energy takes 10-15 years from the initial investment to first production, and to date we have not seen the amount of new projects that would supply the projected increase in demand."

And while the world is gradually moving to new kinds of clean energy technologies the insurance market warns that there could be shortages of earth metals and other raw materials needed to help them thrive.

The United States military is just as alarmed, as a report in 2010 highlighted by the Guardian shows

The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.

The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command, comes as the price of petrol in Britain reaches record levels and the cost of crude is predicted to soon top $100 a barrel.

"By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day," says the report, which has a foreword by a senior commander, General James N Mattis.

It adds: "While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India."

So alarmed that they’re taking extraordinary measures to become less dependent on fossil fuels, far more than the U.S. economy is doing:

Even as Congress has struggled unsuccessfully to pass an energy bill and many states have put renewable energy on hold because of the recession, the military this year has pushed rapidly forward. After a decade of waging wars in remote corners of the globe where fuel is not readily available, senior commanders have come to see overdependence on fossil fuel as a big liability, and renewable technologies — which have become more reliable and less expensive over the past few years — as providing a potential answer. These new types of renewable energy now account for only a small percentage of the power used by the armed forces, but military leaders plan to rapidly expand their use over the next decade.

And there’s this from April of last year from ABC television in Austrailia:

Oil supplies are rapidly dwindling and demand is increasing leading analysts to warn of an impending oil crunch. The global oil supply has lost the equivalent of the volume of the North Sea oil reserve in 15 months. By 2014, supply is expected to fall short of demand. Other factors could bring that forward. Fatih Birol says the age of cheap oil is over and we all need to prepare ourselves for higher oil prices. Further he says no government is prepared for what lies ahead. Jeremy Leggett describes the oil crunch, when global supply fails to meet demand.
Future Pundit posted this in 2010: Dr. James Schlesinger: The Peak Oil Debate Is Over: The peak in Western consumption comes years before the peak in global production because oil consumption growth in oil producer states is cutting oil exports and Asian demand is displacing Western demand. India and China will bid up prices to levels that will cut Western demand well before production peaks. My guess is Western consumption has already peaked.

And just last month: 2005 Seen As Oil Supply Tipping Point:

Stop wrangling over global warming and instead reduce fossil-fuel use for the sake of the global economy.

That's the message from two scientists, one from the University of Washington and one from the University of Oxford in the United Kingdom, who say in the current issue of the journal Nature (Jan. 26) that the economic pain of a flattening oil supply will trump the environment as a reason to curb the use of fossil fuels.

"Given our fossil-fuel dependent economies, this is more urgent and has a shorter time frame than global climate change," says James W. Murray, UW professor of oceanography, who wrote the Nature commentary with David King, director of Oxford's Smith School of Enterprise and the Environment.

The "tipping point" for oil supply appears to have occurred around 2005, says Murray, who compared world crude oil production with world prices going back to 1998. Before 2005, supply of regular crude oil was elastic and increased in response to price increases. Since then, production appears to have hit a wall at 75 million barrels per day in spite of price increases of 15 percent each year.

"As a result, prices swing wildly in response to small changes in demand," the co-authors wrote. "Others have remarked on this step change in the economies of oil around the year 2005, but the point needs to be lodged more firmly in the minds of policy makers."
This film, which has been making the rounds of late, provides a good overview of the topic, and is a good place to end: There Is No Tomorrow:

Does anyone think we're politically and socially equipped to deal with this? Obviously, governments don't care, even if their militaries are preparing for it. It's up to us.

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