Here's an article from the O&G board on AOL. Interesting.
>>>Subject: Oil Article
Date: Tue, Jun 23, 1998 12:46 EDT
From: Tma4440
Message-id: <1998062316461900.MAA11579@ladder03.news.aol.com>
Any thoughts on this article?
> LOS ANGELES TIMES Sunday, June 7, 1998
> The Coming Oil Crisis--Really
> By GREGG EASTERBROOK
>
> BRUSSELS -- The petroleum market is glutted, the member states of the
Organization of Petroleum Exporting Countries are bickering among
themselves even more than usual and gasoline pump prices are lower in
real terms than in the 1950s heyday of the finned Caddy. That makes it
the
perfect time to start worrying about running out of oil!
>
> Enjoy those ponderous four-wheel drives and "utes" while you can. For
the next decade or so, ample world supplies of petroleum seem likely. But
the same kind of statistical barometers that, during the trumped-up
1970s energy "crisis," suggested there was actually plenty of oil, now
suggest that the world is approaching its oil-production upper bound.
>
> Sometime in the next 20 years or less, global petroleum output may
begin a permanent decline, even as world oil demand continues to rise.
Though market forces and improved oil-production technology should keep
petroleum flowing well into the 21st century, the peak of the Oil Age
may come far earlier than conventional thinking now assumes. As Craig
Hatfield, a professor of geology at the University of Toledo, notes, "The
world has burned more oil since the year 1970 than throughout its entire
history to that point. Huge volumes of oil have been found since the
1970s, but we're using that oil so much more rapidly that the top of the
curve is no longer hard to see."
>
> Here's the math. Since the dawn of the Oil Age, the world has burned
about 800 billion barrels of petroleum. Somewhere between 1,000 billion
and 1,600 billion barrels of oil are estimated to remain in
formations
where production would be economically feasible. (These calculations
assume
future price increases to draw out oil that cannot now be produced
economically.) This suggests there may be twice as much (affordable) oil
still in the ground as the world has used so far.
>
> That may sound like a vast amount, but at the current rate of world oil
consumption, 1,600 billion barrels would be depleted in about 60 years.
And world consumption is not standing still but increasing. Current
global petroleum use, already a mind-bending 71 million barrels a day, is
rising at almost 2% a year. Sound small? A 2% annual increase doubles a
figure in 34 years. At just a 2% annual increase in oil demand, by 2010
the
world will have consumed half the total amount of petroleum that
appears economically and technologically feasible to extract.
>
> The rate of consumption growth may accelerate, depending on whether
developing-nation economies prosper. China today imports 800,000 barrels
of oil daily. At its current rate of growth, by the year 2015, China
will
be importing 8 million barrels a day, the same as current U.S. imports.
By
2025, China may import twice as much oil as the U.S. now does. If demand
continues to expand while reserves decline, the oil-price equilibrium
will rise; eventually, supply will become scarce relative to demand, and
a
permanent oil-price spiral could begin.
>
> Think there must be lots of oil out there waiting to be discovered?
That's possible, but most studies show discoveries trending down.
Continental domestic U.S. oil production peaked in 1970, and has been
declining since. Production in Alaska and the former Soviet Union peaked
in 1988 and has been declining since, though economic recovery in the new
Commonwealth of Independent States might alter that equation. OPEC claims
a reserve of about 660 billion barrels of oil, but this number is widely
considered exaggerated. Extensive quantities of petroleum are locked up
in
oil shale and tar sands, but, so far, no one has devised an economical
means to extract such fuels. Unless there exists some large petroleum
formation so far unknown, or some fundamentally new form of extraction
technology, global oil production seems likely to peak while many cars
you
see parked outside your office window are still on the road.
>
> This isn't a doomsday concern, just a reason why a national commitment to
alternative energy forms makes sense now, when there is time to work on
the problem rationally. But the legacy of the ersatz '70s "crisis" makes
it hard for the political, economic and media realms to give this the
attention it deserves.
>
> The short version of the 1970s energy "crisis" is that it was caused not
by any underlying lack of supply but by Middle East politics and
regulatory rules that impeded market forces. Once President Jimmy Carter
decontrolled oil and natural-gas prices, the "crisis" ended. By the
mid-1980s, reduced demand, led mainly by energy-efficiency and auto
miles-per-gallon improvements in the U.S., caused the bottom to fall
out of oil prices, and OPEC to disintegrate as a monopoly.
>
> But in a classic case of learning the lesson of the last war, most
observers now seem determined to believe that since the last energy SOS
was phony, all future alarms must be phony, too. News organizations that
looked silly in the 1970s by squealing about the end of energy now
overcompensate by treating energy supply as old news, when the genuine
news on this subject is yet to come. Economists, clear winners of the
1970s energy disputes, now place too much faith in their own rhetoric,
asserting that higher prices endlessly will refill petroleum reserves by
granting increased incentives to produce. This was true in the 1970s,
when price controls discouraged production; it may not be true after
2010,
when feasible reserves begin to decline. As Hatfield points out, "Market
forces are wonderful, but they cannot increase the amount of oil that
exists to be discovered."
>
> Consumers and producers, both of whom benefit from ample cheap oil, may
be engaged in a game of mutual wishing-away of larger trends. Right now,
4WDs, "light" trucks and enormous "utes" are so popular even Sierra
Club members are barreling down the freeway in eco-nightmare conveyances
that look like armored attack vehicles designed for Desert Storm. You
can't blame business for supplying what the market wants, but that does
not make what the market wants good national policy. Through the 1980s
and
early 1990s, the "energy intensity" of the U.S. economy--the BTU's
needed for a dollar of output--was declining, even as the economy grew
and
people drove more miles in nicer cars. Steady improvements in U.S.
energy
efficiency kept world oil demand soft, holding down prices and moderating
the balance of payments deficit. But beginning in 1995--roughly when the
big-vehicle craze began, though that is not the only factor--U.S. energy
use per dollar of gross domestic product started back upequilibrium
rapidly would swamp in significance all proposed regulatory initiatives
regarding global warming.
>
> Companies like BP and Shell are not speaking of the decline of petroleum
because they have been infected with green virus. They want to remain
large profitable fuel companies, and are simply aware that the energy
future now lies in replacing oil. Many attractive alternatives exist, some
with the virtues of being zero-pollution or wholly renewable. Bus and taxi
fleets in several cities already run on compressed natural gas, which is
cheaper than oil and has lower greenhouse gas emissions. Ethanol, made
from
corn, has unimpressive economics, but new forms of ethanol, made from
genetically engineered grasses or dwarf trees, might be cheap and
environmentally transparent, since plants used to "grow" this fuel
subtract from the air the same amount of carbon dioxide that cars burning
the fuel release.
>
> Forward-thinking oil companies are beginning to pursue such ideas, in
part because the first to offer practical alternative fuels will have a
fantastic marketing advantage over companies whose fates remain tied to
politically vulnerable petroleum supplies. Other oil alternatives are
not
far off. Hydrogen made from natural gas or even by using solar energy
might power "fuel cell" vehicles with no emissions of any kind, other
than
warm water vapor. An energy economy based on solar-power
conversion--increasingly close to practical--would be endlessly renewable,
since its driving force would be the sun.
>
> Right now, the perception of alternate fuels is that they represent some
kind of unpleasant, retrenched standard of living for an age of limits.
Quite the contrary. The attraction of alternate fuels is they will make
possible the sustenance of the consumer lifestyle, by allowing the U.S.
to
kiss expensive, polluting Middle East oil good-bye. If the automobile
continues to gobble declining fossil fuels and spew carbon dioxide, it
might die as a product category, but if car culture can convert to
benign,
renewable fuels, for good or ill, the private car will be with us
indefinitely. Chrysler, Ford, Toyota, Mercedes and other auto makers
already are saying that the first practical fuel-cell cars will be on the
market by around 2005.
>
> The conversion to renewable energy will not happen, however, without a
serious national commitment to new forms of fuel. The world went from
petroleum being an oddity, to a petroleum-based transportation economy in
less than 50 years. The transition to an alternative-fuels economy might
be accomplished faster--fast enough to head off the economic disruptions
of a global oil production peak. But the second, genuine energy crisis
will be avoided only if preparations are made well in advance. Now, with
prosperity high and petroleum politics quiet, is the ideal time to begin.
Better to fix the roof while the sun is shining.
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