Twitter
StumbleUpon
Facebook
Delicious
Digg
Newsvine
Google
Yahoo
TechnoratiWhy The Oil Crunch May Grow Worse
Peak Oil: The 'When' Doesn't Matter
LOS ANGELES - With gasoline and oil costing once-unthinkable barrels of cash, the notion that things in our petroleum-addicted world soon will get worse -- maybe much, much worse -- is spreading fast.
Fear pushed oil to $131.04 a barrel in New York futures trading Monday, closing $2.16 higher after tumbling more than $16 last week. Supply concerns drove the increase as the market fretted about the potential for Tropical Storm Dolly to harm Gulf of Mexico oil operations.
But behind today's oil mania lies a deeper dread: that the world has found all the easy-to-reach oil, and the daily supply of the essential black goo will fall further and further behind escalating global demand.
"As much as you're uncomfortable with today's oil prices, these are going to be the good old days," oil expert Robert L. Hirsch told a recent Santa Barbara gathering of policymakers and environmentalists. "We're talking about pain here that is unimaginable."
The day-to-day cost of oil reflects a sharply weaker dollar, market speculation and geopolitical events such as unrest in Nigeria and other oil-exporting countries. At the same time, producers are barely slaking the world's energy thirst, and the market increasingly is fixated on the long-term supply picture.
Adding to the angst, several industry heavyweights caution that above-ground issues -- including instability among oil-producing nations and shortages of drilling rigs and engineers -- threaten to impose a "practical peak" on oil output that could be just as wrenching as the geologic peak envisioned by Hirsch and others.
"There are more and more people who believe that oil supply prospects are not very optimistic," said Fatih Birol, chief economist at the Paris-based International Energy Agency, a watchdog for industrialized nations.
Some argue that drilling in off-limits areas would buy the U.S. time in the race to develop oil substitutes, cut imports and ease economic pain. To that end, President Bush on July 14 lifted a White House ban on new offshore drilling for oil and natural gas and urged lawmakers to rescind the congressional ban.
Still, Birol counts himself among those who believe the world has reached at least "a peak of easily accessible oil." That alone is cause for worry, because many economies are built around the assumption that oil would continue to be cheap and plentiful.
Birol is leading a groundbreaking reassessment of the worldwide outlook for oil supplies, investment and production that many believe will deliver bad news when it is released in November.
"We are very concerned about future oil supplies," he said. "We may have difficult days to come in the oil markets."
In five years, demand for oil may exceed 94 million barrels a day and continue rising, spurred by growth in China and India, the International Energy Agency estimates. Experts put daily global production at between 82 million and 86 million barrels, and even the most optimistic oil authorities can't see production keeping up with demand without a big boost from unconventional sources such as Canada's vast oil sands or U.S. oil shale. Getting crude from such sources is more difficult, expensive and environmentally harmful.
"Unconventional oil includes all these things like tar sands . . . and some people count all that stuff as oil," said Texas oil investor Jim Baldauf, who in 2005 helped found the U.S. chapter of the Assn. for the Study of Peak Oil & Gas, which has affiliates in 22 countries. "If you do that, then you have a much rosier picture to look at."
Worries that oil production soon will fall short of demand or begin a steep dive aren't supported by the data his company has compiled, said consultant Daniel Yergin, chairman of Massachusetts-based Cambridge Energy Research Associates and author of "The Prize," a Pulitzer-winning oil history. But anxiety about long-term supply, he said, has "contributed to this very fevered psychology in the oil market."
Cambridge researchers acknowledge that the Earth's oil production eventually will max out. But Cambridge Energy Research Associates director Peter Jackson said that day is continually being pushed back because sizable oil reserves still are being found and technologies are boosting yields and paving the way for deep-sea drilling and other options not previously contemplated.
California's 108-year-old Kern River oil field, for instance, was read its last rites several times over the years. But the field recently produced its 2 billionth barrel and is still going, thanks to ever-evolving recovery techniques.
Jackson's conclusion: Don't panic.
He expects worldwide output -- including the unconventional variety -- to continue rising and satisfying demand until at least 2020. Once production peaks, he believes it will level off in an "undulating plateau" before an irreversible decline sets in.
"The equation is still a little bit tight, but demand is softening," Jackson said. "We just have to wait and see how those factors play out."
Hirsch, author of a widely cited 2005 Energy Department report on peaking oil output, sees a more urgent situation.
When he spoke at last month's energy summit, Hirsch said that large oil fields were emptying faster than expected, remaining reserves were overestimated and new finds and technology would offer only incremental additions.
"There's no question in my mind that we're likely to see oil production go into decline somewhere between 2010 and 2012," said Hirsch, senior energy advisor to Management Information Services Inc., an Alexandria, Va., consultancy.
His views reflect the core principle of "peak oil," a decades-old doctrine that holds that global crude production will crest sooner than expected and then begin a precipitous decline. Predictions about the timing vary: Some say we've already hit the peak, while others posit that it won't arrive for another decade or more.
Forecasting is a perilous business. Earlier peak oil predictions, including some from the 1970s supply crisis, missed the mark. Non-peakists have erred in production estimates. And nearly everyone failed to predict the leap in oil prices over the last year.
Geologists and others in the oil industry hotly dispute peak oil predictions, but an increasingly alarmed public has injected fresh momentum into the movement.
"Peak oil is percolating all over the place," a seismic shift from when peak oilists were considered the petro-world's "lunatic fringe," Hirsch said.
Websites devoted to the subject, such as the Oil Drum, have been proliferating. You can buy peak oil boxer shorts at one site and laugh at peak oil jokes on another.
Consultant Matthew Simmons, known in some circles as Mr. Peak Oil, said he is flooded with speaking requests and gets up to 30 Google alerts a day when his name pops up in a new item.
The boiling debate, in which peakists and their critics flay one another's conclusions and intelligence, is fed by imprecise terminology and oil-field data that are questionable or incomplete. For starters, views vary wildly on how much oil remains in Saudi Arabia -- crucial information for projecting worldwide supplies.
Birol, of the international energy group, hopes his November report will "move this debate from having fights in the Internet and e-mail domain, and from a personal domain, to a more objective and data basis."
Tyson Slocum, director of the energy program at Public Citizen, a Washington-based consumer group, doesn't care when the peak will come.
"We should be planning as though we're there," he said, "because from a national interest standpoint, from an economic standpoint and from an environmental standpoint, our dependence on oil, whether it comes from California or Saudi Arabia, is unsustainable."
© 2008 The Los Angeles Times
14 Comments so far
Show AllNDNative,
Great idea. Switchgrass and algae would go well with it as well. By the way, T. Boone Pickens was the same SWIFTBOAT asshole in 2004 and he hasn't changed his stance on drilling for more oil and going nuclear. In reality, he's not really giving any priority to wind energy unlike what the corporate media and even a great deal of the "liberal" blogosphere would have you believe.
I really hate how the oil companies have managed to define the debate as "should we drill more or not?" not "should we build alternative energy or not?" A good chunk of the population really believes that more drilling is the only way out of this.
And I don't know that we need hemp. The need to switch to alternative energy is too urgent to get bogged down by silly things like people's fear of marijuana and hemp. We have switchgrass, seaweed, sugar cane, etc.
hemp4victory,
That is very interesting. "Hooked on scarcity" is a nice way to frame it especially after I start to read the otherwise dull and boring comments after yours. Unfortunately, with the way everything is rotten in this nation and most people are trained to be naysayers, your idea of hemp replacing oil is going to be botched. It's the same up here in North Dakota. There's plenty of wind to run our wind energy mills and if the DEA would butt out, North Dakota farmers who are trying to compete with Canada on growing and even trading hemp would get a fair play. Unfortunately, even liberals believe in all this "free trade" nonsense and big government such as DEA and CIA. I hear Obama is for legalizing Cannabis but I'm not holding my breath given the special interests he's tied to. Oh well, maybe someday we'll all get our chances.
In the meantime, if anyone on this site wants to listen, learn, and actually rise above the oil crisis, here's an idea. If any of your vehicles are running on diesel engine, fill your tank up with at least 1 cup of hemp seed oil. My MPG went up by 5, honest. Hemp seed oil is also the very best engine lubricating agent and unlike other biofuels it does not turn to gel even in the coldest of conditions. Spread the word around and let's all get moving. The more people fill up their diesel tanks with hemp seed oil, the more America will switch from gasoline engines to diesel engines although I hear hemp can be processed for gas engines as well albeit a bit more complex. And the more America imports hemp, the more they'll stand up to the DEA and force big government to tear down the ban and allow more people the freedom to grow their own oils and power up locally and quit stooping to wars for oil and environmental degradation. Plus I too would love to see better plastics from hemp instead of petroleum for a change.
When oil man T. Boone Pickens starts talking about a crash program to become weaned off oil, and seeks any alternative - wind, solar, nuke, oil shale, deep water drilling, and drilling in ANWR, you KNOW there is a serious problem.
Sparticus - You are on the right track. But look around you. What do you see that is made from, extracted by, or transported by oil?
Think about it for a moment.
If you feel a horrible sense of dread when you realize just how much is affected by oil, you almost have the start of understanding the kind of problem we are facing.
All of the talk about "peak oil" is somewhat misleading. What we really should be focusing on is peak energy. If by the term "oil" we include tar sands, oil shale, possibly methane hydrates, etc., then, of course, we are nowhere near "peak oil". However, if you are talking about the amount of energy available to drive all of our economic activities in a highly industrialized world, then we are essentially now at peak energy. This is related to the fact that petroleum (especially sweet crude) is the most potent form of energy known to us in terms of the energy we gain in relation to the energy it takes to make use of that energy - a concept known as Energy Returned on Energy Input (EROEI). No, we are not running out of oil any time soon, but the amount of energy available to us is (or soon will be) in irreversible decline. This will bring about economic recession and worse. This is what we should be focussing the discussion on, folks. And that's why this article, though welcome considering it's a mainstream piece, and all of the prior comments in this discussion continue to muddle the issue.
200 billion/month down a war-profiteering Al Qaida scaring Republican rathole in Iraq could make us energy independent pretty quickly.
Radio_tec--Sorry, but as much as I dislike Yergin, he does not believe in the abiotic oil hypothesis. He wrote The Prize afterall, which is perhaps the best introductory history of oil and the oil business written, and is very aware of how oil is formed through geologic processes.
As for the recent drop in oil price, much is do to the relaxing of the war threats made against Iran, the perception that Obama is making the right moves to further diffuse "tensions," which provides for the drawing of a conclusion that an Obama presidency will provide more stability and peace in the world. The "Market" seems to understand that Iraq will not increase its production as long as US troops remain; thus the movement toward withdrawl further lessened the "security premium" placed on oil price. On several occasions here at CD, I predicted the rapid fall in oil price if the war drive against Iran visibly ceased and the end of US troops in Iraq became a real possibility. The underlying problem of supply not meeting demand will likely keep oil price above $100, and this lower price will in turn spur an increase in demand which will cause the price to rebound in the near future. Furthermore, the Gulf of Mexico hurricane season looks to be more active this year and will have an impact on price and supply in the US.
But as Hirsch points out, Peak Oil and those of us who've struggled to raise awareness of this coming crisis are no longer "lunatic fringe." That doesn't mean there aren't lunatics involved in addressing the problems presented by Peak Oil, which is the underlying force driving the War of Terror. Peak Oil and Energy Imperialism provides lots of evidence in this regard. It becomes ever more important for us to show the War of Terror is a war for energy hegemony. Obama may be currently seen as diffusing "tensions," but he's still a wanabe Imperialist as his other actions prove, and the great number of think tanks documented in the above link are quite comfortable with Obama as the next elected Emperor and still drive policy formation and implementation. Great Game II after all has just begun, with stakes being arguably higher than 8 years ago.
"Earlier peak oil predictions, including some from the 1970s supply crisis, missed the mark." No they did not. In the 70s peak oil was predicted for production in the United States. Then, as now, oil industry hacks were in denial mode but we know this prediction was correct.
The real question should be why oil, the fundamental basis of our economic system is allowed to be traded as a commodity like gold? My water, electricity, and natural gas are governed by a public utilities commission. How do we know the oil industry doesn't buy up it's own oil through third parties to boost the price? After all, they are making record profits while not having to do any expanding (which would cost money). In effect, less drilling would lead to even higher profits.
The oil companies do think in the long term though, long enough for those running them NOW to make their profits before they retire with their obscene golden parachutes. This is the push behind opening up previously off limit areas. Am I the only one that sees this? The current impact is exactly the leverage the oil industry was looking for to push for drilling in ANWR and off the California and Florida coasts. Of course we won't see any oil from these places for years even if they were allowed to start today. They just covet these areas because it will extend their period of profit. ALL accounts show that none of these places will put a dent in our consumption of 21,000,000 barrels of oil a day. The oil companies reasoning is simple; At least more profit will go to an American company. Yeah, but it won't do anything to help our current condition and how much of that profit will be taxed? Remember, Enron had over 800 (that's right, eight hundred) off shore accounts to avoid paying taxes on their profits.
Chicken Little actually had investments in oil and coal and suscribed to the Peak Oil routine since before the seventies. The old thinking is that we need more oil or... we would face what? Disaster?
If we use all the oil we have already even without new finds... disaster! Coal is even worse. Yet Chicken Little is the name of the game when the price per barrel is so high.
Do you think they want to help us get off oil when staying with oil is so profitable? For as long as possible too. They see trying to save the planet as the envirornmentalist threat to continuing this plentitude of profit.
Peak Oil screams Chicken Little...drill, drill, drill! What a pathetic joke. The year 2020 they say we will see the start of a decline... and solemly too. That decline would take another ten or twenty year?
A lot of oil and profits.
When we are warned by scientists that we must cut 80% of our carbon production by 2020... How does that work?
Peak Oil as a concept has a time frame of continuing unabated use of oil for at least twenty five more years.
Peak Oil is what they are using as the weapon against the ... um... Earth huggers.
We can't add all that carbon ... scientists tell us.
Peak Oil says ... we can't give up such profits.
Chicken Little screams Peak Oil!
But by 2020 it's either we cut 80% of our carbon use or Chicken Little starts getting fried like the rest of us. Um... anybody notice the ice cap is disappearing in your lifetime?
One thing is pretty much sure...
the ice cap will be gone in summer by 2020. Call it a bad omen?
"Worries that oil production soon will fall short of demand or begin a steep dive aren't supported by the data his company has compiled, said consultant Daniel Yergin, chairman of Massachusetts-based Cambridge Energy Research Associates and author of "The Prize," a Pulitzer-winning oil history. But anxiety about long-term supply, he said, has "contributed to this very fevered psychology in the oil market.""
Daniel Yergin is hardly the one to consult when it comes to oil production curves. He has been consistently wrong and does not believe that oil is the product of over 1 hundred million years of high pressure and heat of dead plankton deposited on the floors of our oceans. Instead he subscribes to the Abiotic theory of oil production where it is just as natural as any rock strata except that it just flows out of the earth. James Howard Kuntzler, author of "The Long Emergency" describes Abiotic Oil theory, which he does not subscribe to, as if the world is a chocolate bon bon and the gooey center is where the oil is.
"Some argue that drilling in off-limits areas would buy the U.S. time in the race to develop oil substitutes, cut imports and ease economic pain."
"Some" are stupid. How in the world could drilling in off-limits areas, a prospect that would involve construction of infrastructure, which would involve several years lead time, "buy the U.S. time"? Obviously the problem is here NOW, not at some point in the distant future. Or is $150 a barrel oil just another Birkenstock-liberal hallucination?
We had the chance to address the reality of finite oil 30 years ago, but decided that we'd rather invest in more suburbs and SUVs than in changing how we do business. I hope we can get various sources of renewable energy online ASAP and learn to make do with less, instead of keeping our heads in the (tar) sand, building more nuke plants, and burning more coal.
Based on our track record of foresight, though, I ain't holding my breath.
For those that think speculation is the main cause of high oil prices:
http://canadianpress.google.com/article/ALeqM5g34uMdGMimnc273w1t5J3dFBmlnw
Not so says Warren Buffet; he's saying it is a supply demand issue.
Tyson is absolutely right. There are many reasons to get off oil. So it doesn't matter when the 'peak' actually happens.
So when will the US stop complaining and allow Industrial Hemp to actually compete with crude oil in the market? What are you people afraid of? The fact that hemp can replace coal, oil, gas, and even nuclear 100%? Instead of getting hooked on scarcity, why not give hemp a chance and stop electing politicians who won't give it a chance and in some cases are tied to Big Oil?