Hey BD,
Here's one for you. A couple of quasi-good points wrapped up in yesterday's parrot cage newsprint.
This one goes out via E-Mail. Look for the kooks to start polishing off the old Earth Shoes and looking for a place on the roof for those home made solar water heaters.
Regards to all,
Aggie
A NEW ENERGY CRISIS: When Will We Ever Learn ?
By C.J.Campbell, September 12, 2000
Archived at dieoff.com
The French fishermen led the revolt, but it soon spread across the Channel.
Everyone is up in arms about the high price of fuel. Understandably they are
confused and look for someone to blame, finding ready candidates in a greedy
Chancellor or the OPEC sheikhs. They are right to blame the Government: not
for the high price of oil but for their record of denial and obfuscation in
facing up to the reality of oil depletion. Had the people been better
informed, they would have devoted their energies not into blockades but to
finding viable long-term solutions.
The world is now entering a new oil crisis. The roots of it have been
evident for a long time to those analysts who give due weight to the
endowment of oil in nature, its distribution and above all its depletion.
Others, with a blind faith in technology and market forces, have failed to
read the signals.
Oil has to be found before it can be produced, meaning that there is an
obvious relationship between discovery and production. It follows that the
peak of discovery in the 1960s, which is now an historical fact, has to be
followed by a corresponding peak of production. When the numbers are added
up, the evidence indicates that such a peak for conventional oil will arrive
around 2005, and about five years later for all hydrocarbons, assuming no
radical change in demand.
Oil is most unevenly distributed for geological reasons, with about half the
remaining conventional oil, lying in just five Middle East countries.
Furthermore, the expropriations of the 1970s distorted the normal economic
pattern of depletion. It forced the industry to explore and exploit the
relatively difficult and expensive places like the North Sea or Alaska as
fast as possible, leaving the principal OPEC countries with control of the
relatively cheap and easy oil, found long ago. This predictably led to price
volatility.
The oil industry has suffered throughout its history from "boom and bust",
which is inherent in the very nature of finding and producing a liquid
resource, concentrated by Nature into a few preferred places. The industry
has accordingly always needed a degree of overall control that runs in the
face of free market capitalism. Such control has been exercised variously
by Standard Oil, the Texas Railroad Commission, the major oil companies and
finally OPEC itself. Up until now, such regulation has sought to limit
excess production to support price in an environment of surplus capacity.
The fundamental nature of the regulation however changes at peak production
when the need is to produce more not less. The Texas Railroad Commission
ceased US pro-rationing when that country peaked in 1970. North Sea
production is at peak now and set to fall at a high rate. The FSU peaked in
1988, and non-Gulf OPEC countries have also peaked. It means that the
control of the supply of world oil rests squarely with the five Middle East
countries.
This seems so obvious, yet it is not widely understood. Even the OPEC
governments themselves fail to fully grasp the strength of the position that
has been forced upon them. They have a misplaced fear that rising prices
will encourage non-Middle East production, spurred by new technology and
market forces. They fear that high prices will prompt a move to alternative
fuels, including gas, coal and nuclear power, as well as energy savings and
eventually renewable energy..
In reality, non Middle East production is inexorably set to decline through
natural depletion. Production in the North Sea will halve in about ten
years. Accordingly, the share of conventional oil production coming from
the five Middle East countries is set to rise. It was 38% in 1973 at the
time of the first oil shock, but had fallen to 18% in 1985, as already
found new provinces in Alaska, the North Sea and elsewhere delivered flush
production from giant fields. They are always found early in the exploration
process. Share has been rising since 1985 to reach 30% to-day. This time, it
is set to continue to rise because there are no major new conventional
provinces ready to deliver, or indeed in sight. By 2010, it is likely that
the Middle East will be asked to supply 50% given that demand can be held
steady by rising prices.
The world has huge deposits of non-conventional oil in the form of heavy
oil, bitumen, oil shale, polar and deepwater oil but it is perforce a slow
and expensive business, carrying environmental costs. It cannot accordingly
have any material impact on peak,
Spare capacity can mean many things. A shut-in Middle East well can be
re-opened to provide an instant high rate of flow, but infill drilling,
enhanced recovery techniques and exploration can deliover less, taking much
investment, work and above all time. The OPEC producers have to run ever
faster to stand still, as they desperately seek to offset the natural
decline of their old fields, which hold most of their oil. 90% of the
world's oil comes from fields more than twenty years old, and 70%
from fields more that thirty years old.
It transpires that there are very few shut-in wells anywhere. The world is
just about out of operational spare capacity and. An improvident draw on
stocks has left them at a 24 year low.
OPEC has no good reason for raising production when its revenues increase by
not doing so. The Western consuming countries also have no good reason to
press OPEC to increase production. It would merely mean that the inevitable
global peak becomes higher and the subsequent decline steeper. While
increased production would solve a temporary price surge, it offers no
long-term solution to the West.
OPEC now finds itself in a dilemma as it begins to question its fundamental
role. Is its traditional function of rationing production to support price
giving way to a new policy of having to exert pressure on its members to
increase production to meet the consuming nation's demands and possibly
threats, even military threats? It is ironic that Britain and the USA
continue to bomb Iraq, whose oil they now desperately need.
You do not have to be a rocket scientist to understand the simple concept of
depletion. Think of a glass of beer. The first sip tastes good, but your
brow creases when the glass is half empty and you realise that you have
drunk more than remains. When the glass is empty, all you can do is ask for
another unless it is closing time. It is the same with oil. Peak comes more
or less at the midpoint of depletion, when the glass is half empty.
The reason why people don't understand the situation better is that the
public data on reserves is grossly unreliable, subject to lax definition and
poor reporting practices. The industry has systematically under-reported the
size of discoveries for good regulatory and commercial reasons.
Accordingly, the reported reserves have appeared to grow over time, giving
the misleading impression that more was being found than was the case. In
fact, the world consumes four barrels of conventional oil for every one it
finds. The upward revision is mistakenly attributed to advances in
technology when it is simply in the reporting. Technology holds production
as high as possible for as long as possible, which increases profit, but
has little impact on the reserves themselves. A field contains what it
contains because it was filled in the geological past.
BP wins the prize for the most oblique reference to the depletion of oil,
its principal asset, when it changes its logo to a sunflower and says that
BP stands for Beyond Petroleum.
Th world faces an oil crisis. Oil production is at peak. We depend on it for
transport and agriculture. World trade depends on transport. We are not
running out of oil, but we are facing the natural peak of the fuel that has
driven our economy and prosperity for most of the last Century. What should
we do about it? The first step is to satisfy ourselves as to the facts, and
then face them head on. The second step is to use the oil we have
intelligently to help us over the transition as a matter of urgency and
priority as we find new ways of using less. We have only to look at our
traffic choked streets to see how wasteful we are.
The message for government is clear. Get off your knees and stop begging
OPEC for help. Face the situation squarely. Inform the people honestly so
that they will support the measures to be taken, however draconian, and then
get to work on a new direction. Think of 1940.
------------------------------------
Also see:
THE IMMINENT PEAK OF WORLD OIL PRODUCTION
A presentation to a House of Commons All-Party Committee on July 7th 1999
by C.J. Campbell
hubbertpeak.com
THE END OF CHEAP OIL
by Colin J. Campbell and Jean H. Laherrère,
Scientific American, March 1998
dieoff.com |
