Category: commentary

This week, we would like to present our agenda for the 2011 ASPO-USA Conference – Peak Oil, Energy & the Economy to be held November 2-5 (Wednesday – Saturday) in Washington DC.

Wednesday is a pre-conference day featuring visits with Congressional offices and Congressional staff. Thursday will focus on the latest information on oil and energy trends, and analysis of their implications for the economy. Friday will focus on strategies and opportunities to adapt to a new energy and economic reality. Finally, Saturday will focus on interactive roundtable sessions where YOU will have in-depth discussions with speakers and other invited guests.

As we previously forecast, the decline in world oil production is likely to occur in the next 1-4 years, a year having passed since we forecast 2-5 years. Some believe that weak worldwide economic conditions will significantly extend the onset of decline. We believe that the delay will be essentially negligible.

Because of the myriad of variables, the timing of the onset of the decline of world oil production cannot be predicted with certainty. In the early 2000’s when we began our world oil production studies, we thought that future world oil production might peak sharply, similar to U.S. production, which sharply peaked in 1970.

Daniel Yergin’s 2004 and 2005 Predictions for Oil Prices, Production and Exports – Three Strikes and You Are Out?
Daniel Yergin, whom the media have consistently designated as one of the world’s premier experts on energy matters–and who has a consistent track record of predicting higher oil production levels–has been very visible of late, especially with a full page essay in the Wall Street Journal, focused on why concerns about Peak Oil are misplaced.

The trouble with apocalypse is that most people have already seen it at the movie theater, watched it on television, read it in a book, or heard all about it from the pulpit. So inundated with the language of crisis, that we have become immune to it. From the perspective of the historian our age has been chock full of “great transformations.” And, it is, after all, the historian’s business to write about great change even if he or she has to invent some.

My friend, Rob Dietz, has reminded me about these words by Aldo Leopold: “One of the penalties of an ecological education is that one lives alone in a world of wounds.” But when I mention the assorted causes of my internal bleeding to my wife and friends, they all look at me with disbelief and impatience. They do not feel the way I often do. What if their thinking is wiser and reflects what really can be done in a world overrun by seven billion people, who always want more than they have at any given moment and place? For most people on the Earth, “more” means safe water to drink, fresh food to eat, and a shelter with a cook stove and an outhouse. For the very few “more” means a $2.5 million watch and unlimited access to all conceivable resources to be used at will.

This week, we would like to present our agenda for the 2011 ASPO-USA Conference – Peak Oil, Energy & the Economy to be held November 2-5 (Wednesday – Saturday) in Washington DC.

Wednesday is a pre-conference day featuring visits with Congressional offices and Congressional staff. Thursday will focus on the latest information on oil and energy trends, and analysis of their implications for the economy. Friday will focus on strategies and opportunities to adapt to a new energy and economic reality. Finally, Saturday will focus on interactive roundtable sessions where YOU will have in-depth discussions with speakers and other invited guests.

The Thursday morning session will take place inside the Congressional Auditorium, the 450-seat theater inside the U.S. Capitol. We hope to see you in Washington.

Most approaches to “solving” our climate and resource crises focus on technology: replacing fossil fuels with a different technology (solar, wind, ethanol, nuclear), or increasing the efficiency of our current technology. We focus on increasing the efficiency of things which would then be used in the same way – adding insulation to single-family homes, or doubling the efficiency of single-user cars that sit idle in the garage and parking lot for the vast majority of their lives, or harnessing renewable sources of energy that would then continue to be used unnecessarily and wastefully. While these solutions may marginally slow the velocity of an economic and energy descent, they can’t seriously apply the brakes to the very unpleasant net energy free-fall that may be in store for our society.

Among the various solutions proposed to our predicament, the most promising innovation may be social innovation. Over the past one hundred years, we have manufactured vast amounts of things – houses, buildings, infrastructure, cars, machines, equipment, supplies, computers, networks, and so on. But these things – our already built resources – are often underutilized, or inefficiently used, due to our social customs, norms, habits, and expectations, and the psychology of status, privacy, and entitlement.

Back in the 1960s and 1970s, the country that was the “big growth story” was the Soviet Union. Its oil consumption grew by leaps and bounds. Its space program grew; its military program grew; and it became much more industrialized. But then something happened to stop the amazing growth story. The Soviet Union became the Former Soviet Union (FSU) in late 1991, and even before that, oil production and consumption slowed.

In this article I will further expound on my reasoning behind the ELP plan, otherwise known as “Cut thy spending and get thee to the non-discretionary side of the economy.”

I have been advising anyone who would listen to voluntarily cut back on their consumption, based on the premise that we were probably headed for a period of deflation in the auto/housing/finance sectors and inflation in food and energy prices.

On June 23rd, the International Energy Agency (IEA) and the US government announced the intention to tap strategic petroleum reserves (SPRs) of the US and other countries, with an eye to reducing oil prices. The US was to provide 30 million barrels (mb) and other countries a similar amount, for a total draw of 60 million barrels.

The market responded sharply, with oil prices falling nearly $6 / barrel within a day or two; the intervention appeared effective. But it was not too be. Within a week, oil prices had recovered the pre-announcement price. They are even higher now. The market simply absorbed and discounted the news.

In the issues of energy, many Americans pin their hopes on far-away technology solutions that will enable the nation to continue its growth in energy consumption, while sparing the public the challenge of making common-sense changes in our lives for greater community development, energy efficiency, and resource conservation. This week, Christine Patton, Co-Chair of Transition Oklahoma City, takes a humorous look at this line of thinking by describing a fictional future event and an out-of-this-world solution to America’s energy challenges. – ASPO-USA

June 18, 2012 — CAMBRIDGE, MASS —

In a Gallup poll released today, Americans chose dilithium crystals as the “most likely” fuel to run future cars and power plants, with 84% of Americans choosing the crystals over other options including nuclear, hydrogen, corn ethanol, shale gas, and photovoltaic solar panels. Respondents indicated that dilithium crystals are popular for providing quiet, clean energy, with a proven track record of seven-hundred twenty-six episodes in four different Star Trek television series.

The IEA decision to release 60 million barrels from strategic petroleum reserves (SPR) of member nations has been criticized as politically motivated, too small and too late to matter, or, at best, as a desperate attempt to fend off economic woes. The reality and impact of the decision are more complex than that. The move is a bold, price-suppressing “poke in OPEC’s eye” from nations that have been perpetual price takers in the world oil market. The short-term rationale for the decision, however, should not obscure our real oil problem – geopolitics is combining with economics and geology to put us in an oil crunch that is not likely to abate until our nation moves beyond oil.

The timing and volume of the decision make sense, and one need only to look at the vigorous complaints from Iran to gauge its significance. The Libyan conflict became a factor in February, and it took time to recognize that its 1.3 million barrels per day export volume was lost to the market on a relatively long-term basis, and to fully grasp the impact on the OECD economies. It took time to see that OPEC’s promise to cover the loss had little substance, as confirmed by the recent OPEC meeting.

Recently President Obama, under pressure from Republicans and the public to bring down gasoline prices, announced a plan to expand domestic oil production in Alaska and the Gulf of Mexico.

The media appeared to joyfully trumpet the idea that with expanded oil drilling in the U.S., oil production would ramp up. No one in the media appeared to question that idea although I’ve made the case on several occasions that U.S. oil production will, in general, trend down in the future even if every last acre of U.S. territory were soon opened for oil development.

The belief among the media, politicians and the public, in general, is that with increased drilling and expansion of available territory, oil production absolutely increases.

The world oil production data below tell a story about: 1) nations that are past peak (see “Peak Year,” turquoise fill), because of geologic limits (e.g., US, Norway, etc.) or other reasons; and 2) nations that have yet to peak (see “na” under “Peak Year;” Saudi Arabia, UAE, China), or if they have peaked it is not yet clear. An equally interesting trend is–irrespective of peaking–whether or not nations are increasing (first column; Brazil); have either flat or volatile production (second column, in blue; Iran, Iraq); or are experiencing decreasing production (third column, in red); the 2009 OPEC quotas continue to complicate the overall numbers here. Also, follow the trend of oil production nations whose exports are declining. Six non-OPEC nations increased by over 100,000 barrels/day-year (vs. 12 in 2004); two non-OPEC experienced declines over 100,000 barrels/day-year (also two in 2004). Peak appears to be close but not yet; we were on relatively plateau production during 2005-2008, then down in 2009, up strongly in 2010, up so far in 2011. Keep following the increasing roles of economic-driven demand destruction, violence, the Arab Spring, resource nationalism, timing of production investment and peak oil exports.

There are so many challenges facing us as a result of Peak Oil and related issues that it is easy to miss something important. ASPO-USA asked more than 50 leaders on Peak Oil to share what they felt was the most critical issue we’ve all been missing, the thing every one of us should be talking about – but aren’t. The answers were eye-opening, and have started a discussion that continues. This is the last in a three part series (First two parts available here and here), in place of a traditional commentary, Peak Oil Review will run a range of perspectives on this issue – from geologists to food experts, from social critics to scientists – what are we missing? Where should we be putting more attention, more resources? All of us miss things – but between so many working minds, we have a better chance of covering the expansive ground that we have to address. We thank all of our contributors for expanding our vision!

(Note: Commentaries do not necessarily represent the position of ASPO-USA.) There are so many challenges Continue Reading

There are so many challenges facing us as a result of Peak Oil and related issues that it is easy to miss something important. ASPO-USA asked more than 50 leaders on Peak Oil to share what they felt was the most critical issue we’ve all been missing, the thing every one of us should be talking about – but aren’t. The answers were eye-opening, and have started a discussion that continues. Over the next three weeks, in place of a traditional commentary, Peak Oil Review will run a range of perspectives on this issue – from geologists to food experts, from social critics to scientists – what are we missing? Where should we be putting more attention, more resources? All of us miss things – but between so many working minds, we have a better chance of covering the expansive ground that we have to address. We thank all of our contributors for expanding our vision!

As Pogo said, “We have met the enemy and he is us.”

I think that a large portion of the US oil & gas industry has basically shot itself in the foot, by agreeing with, or failing to confront, assertions such as the following by CERA, ExxonMobil and OPEC:

CERA: “Rather than a ‘peak,’ we should expect an ‘undulating plateau’ perhaps three or four decades from now.”

Robert Esser, Senior Consultant and Director, Global Oil and Gas Resources Cambridge Energy Research Associates
December 7, 2005

The March 28, 2011 edition of the ASPO-USA Peak Oil Review had a brief which I found of considerable interest. It stated:

A perspective paper in Journal of Chemical Technology & Biotechnology makes a case that conversion of biomass to cellulosic ethanol is the most efficient and productive use of biomass to create a high-octane, environmentally friendly transportation fuel. (3/23, #17)

I found it to be of considerable interest because there is a proposal to build a commercial cellulosic ethanol biorefinery in the eastern Upper Peninsula of Michigan not far from where I live.

Based upon information provided by the corporation proposing the biorefinery, Frontier Renewable Resources LLC, owned by Mascoma Corporation and J.M. Longyear, I would not consider cellulosic ethanol to be efficient from an energy perspective.

In a Brookings Institution presentation in early 2009, UCSD economist James Hamilton suggested that the government think of using the US Strategic Petroleum Reserve (SPR) to counter high oil prices. Although the suggestion failed to gain traction at the time, recent upheaval in the Middle East is once again putting the future of the SPR back on the agenda. Should the reserve be drawn to cool oil prices which have surged on the back of lost Libyan crude output? I must admit I was somewhat cool to the idea when Hamilton published his Brookings paper, but his suggestions often prove prescient and therefore deserve closer examination. Indeed I became much more convinced when I saw a Federal Reserve presentation on short term oil prices, which largely concluded that the institution has little insight into short term oil price movements. Given the potential impact of oil prices on the economy, the Fed does not have the luxury of such ignorance.

The SPR was established in 1975, after the first oil crisis, with the purpose of providing a critical petroleum reserve to the US which could be drawn in the event of war or embargo. This seems sensible enough. A large and militarily critical power like the US should avoid being held hostage to energy exporters like the Gulf states and Russia. But the oil-price spikes of 2008 show that oil prices can substantially damage the US economy even without hostile acts by other countries.

In 1999, I wrote a paper concerning the production decline of North Sea oil fields and made projections for the future of Norwegian and United Kingdom (U.K.) oil production (crude + condensate). For comparison purposes, I compared my projections with those by the U.S. Department of Energy/Energy Information Administration (US DOE/EIA). Table I is from that paper.

Restrictions on world oil production can be divided into four categories:

1. Geology

2. Legitimate National Interests

3. Mismanagement

4. Political Upheaval

Consider each in reverse order:

Political upheaval is currently rampant across the Middle East, resulting in a major spike in world oil prices. No one knows how far the impacts will go or how long it will take to reach some kind of stability and what that stability will mean to oil production in the Middle Eastern countries that produce oil. We are thus relegated to best guesses, which span weeks, months, or years before there are clear resolutions. One pre-Middle East chaos country limited by political upheaval is Iraq, which is believed to have the oil reserves to produce at a much higher level, but Iraqi government chaos has severely limited oil production expansion. In another long-standing case, Nigeria has been plagued by internal political strife, which has negatively impacted its oil production.

You and I use a lot of energy. Every second of each day and night we devour 100 times more energy than we need to live. If I were to eat that much energy as food, I would be a 50-foot long bull sperm whale, weighing 40 tons. There are 300,000 sperm whales worldwide, half of them bulls (females are much smaller), and 300,000,000 Americans (females are about the same in size). Our Earth cannot feed and protect 300,000,000 male sperm whales. She is simply too small.

Our voracious appetite for energy must be either extinguished or quenched with local sources of energy (and, no, wind turbines and PV cells are too small to provide even a single ample energy meal per day).

In his recent column in the New York Times, Michael C. Lynch shows that he does not grasp the crucial difference between crude oil reserves and supply (“Drilling for an Oil Crisis”, February 24, 2011). Demand and the rising cost of getting oil out of the ground are apparently not important in his “don’t worry be happy” message that the plentiful oil of the past will continue into the indefinite future.

For him, reserves are all that matter. The fact that reserves usually take years of drilling and complex negotiations before they become supply escapes him. Of all the oil discovered in the last decade, less than 3 percent has been produced so far (M.K. Horn and Associates, Giant Fields Database, 2010). I suppose Mr. Lynch thinks that this is good news for the future, but it does nothing to address today’s soaring demand.

Modern man, the kind with the 1400 cc brain, is said to have been around Continue Reading