Category: commentary

The price of oil is once again daily in the news. The western Europe benchmark Brent crude has hovered near $100 / barrel for much of the last month, and the IEA is again warning of the burden of oil consumption. Is this a harbinger of things to come, or a mere statistical blip in a market that is ‘well supplied’? How will events play out in oil markets in the coming year or two?

Certainly, oil prices have surged on the back on strong demand, of which some is structural, and some transient. The northern hemisphere has seen a strikingly cold winter, leading to increased heating oil usage. And the global economy is recovering from a deep recession, with demand bouncing off the recessionary trough. These are, to an extent, passing events. But in many respects, increased prices fundamentally reflect an oil demand that is increasing faster than supply.

“He may be a son of a bitch, but he’s our son of a bitch.” Continue Reading

Mission failure. The Energy Information Administration (EIA) is funded by American taxpayers to warn about Continue Reading

The e-mails started coming in to my mailbox this fall, their quantity and excitement level tracking the rising oil prices. Had I heard that this analyst just predicted $110 a barrel of oil by next year? How about this analyst, who suggested we might hit $200 a barrel by the end of 2015? As oil snuck past $80 a barrel toward $90, more and more of these predictions were made by analysts seeing a trend, and more and more of them were sent to me by correspondents as evidence that oil prices are going up – way up.

I understand why my fellow peak-oil activists are excited. High oil prices make sense to the general public, and when oil prices are high, peak oil gets serious attention. Phrases like “the end of cheap oil” start making sense to people. When gas and heating oil prices make the news, the language of peak oil resonates. It is easy to explain to someone ignorant of energy issues: “Peak oil means that you won’t be able to afford to get to work and that the price of everything made with oil (which is everything) is going up.”

Five years ago, John Tierney, a columnist with The New York Times, and Matt Simmons, peak oil guru and founder of energy investment bank Simmons & Co., made a bet. Simmons argued that oil prices would be much higher in 2010. Tierney, a believer in human ingenuity and a follower of economist Julian Simon, took the other position. Simon, a so-called Cornucopian, argued that there would always be abundant supplies of energy and other natural resources and that the real price of commodities like oil would remain stable or decline over time.

Top 10 Developments of 2010

1. Unexpected Growth in Global Demand

As the global demand for oil increased during 2010 the IEA was forced to steadily increase its forecast for average annual demand. In January the agency said that the increase over 2009 would be 1.4 million b/d. By July that had increased to a 1.8 million b/d gain and in mid-December the estimate was up to a 2.5 million b/d increase in global oil consumption. The agency notes that in the 3rd quarter global demand may have been up by 3.3 million b/d over the previous year, a rate which is clearly outstripping increases in production and indicating that a drawdown in global stocks is taking place.

Everyone in the Peak Oil Community knows the danger of making predictions. Trying to call the future is a challenging project. But ASPO-USA and Peak Oil Review have combined to pull together predictions about what we can expect in 2011 from a wide range of thinkers, writers, scholars and experts, who graciously agreed to risk being wrong so that you can have the inside scoop!

We all remember the oil price run-up (and run back down) of 2008. Now, with prices similar to where they were in the fall of 2007, the question quite naturally arises as to whether we are headed for another similar scenario.

Of course, we know that the scenario cannot really be the same. World economies are now much weaker than in late 2007. Several countries are having problems with debt, even with oil at its current price. If the oil price rises by $20 or $30 or $40 barrel, we can be pretty sure that those countries will be in much worse financial condition. And while governments have learned to deal with collapsing banks, citizens have a “been there, done that” attitude. They may not be as willing to bail out banks that seem to be contributing to the problems of the day.

Political prognostication is a dangerous game, but one of the certainties of the latest election was that the US will not be enacting any significant federal climate legislation. One could be forgiven for wondering what the election has to do with anything. In the two years previously during which the Democrats controlled Presidency, House and Senate, the US had failed also to enact any climate legislation, but we have moved from the faintest possible hope to none at all.

If inaction is certain on climate change, it may be that all is not entirely hopeless if we reframe the terms to addressing our carbon problem. Peak-oil activism could accomplish many of the goals of climate activists. Unlike climate change, peak oil doesn’t carry the ideological associations with the left that climate change does. Could peak oil provide a framing narrative for political action to address both climate change and peak oil? Certainly, a great deal would have to happen in order to accomplish this. But peak oil is a sufficiently powerful and pressing issue that its profile could be raised, particularly if current climate activists were willing to change their focus from the means of achieving consensus on climate change to the end of achieving emissions reductions.

Peak oil activists and the mass media have had a rocky relationship. Activists often don’t understand how the media works and can’t fathom why reporters and editors are not better informed about energy issues. Those working in the media are constrained by the interests of their advertisers, their corporate owners and the necessity of focusing on ratings and circulation.

(Note: There is so much bad news in telling the Peak Oil story that we Continue Reading

To everyone’s collective enormous relief, the IEA’s 2010 World Outlook reassured the world that while oil prices may rise and conventional crude oil production may have peaked in 2006, we don’t have to worry about dramatic, longer-term energy-price increases. IEA predicts a gradual creep towards $113 per barrel by 2035. By 2015, we do have to worry that we might get up to $90 per barrel, with the high costs that imposes on ordinary people and the burdensome effects on the economy, but we’ve got five years, we are assured.

A small subset of the public (1) believes in both global warming and peak oil Continue Reading

At the ASPO Conference in early October 2007, Robert Hirsch presented his view of the impact of peak oil on the economy and society. While most of his assertions are readily supportable, the historical record is nevertheless perhaps more nuanced and deserves consideration in thinking about future events.
To begin with, there have been to date arguably two peak oil recessions. The first of these, the period of the Iran-Iraq war after 1979, was artificial. Saudi Arabia decided to defend a high oil price with production restrictions, despite the fact that production capacity was largely adequate to meet global needs. As a consequence, oil production fell in a pattern similar to that which we might expect after peak oil. By contrast, the oil shock of 2008 was arguably the first, true global peak oil recession. Unlike the shocks of the 1970’s, there were no supply disruptions. The world simply ran out of spare capacity. While the oil supply did not peak in the accounting sense, for the first time, it was structurally unable to meet growing global demand. These two periods, then, tell us something about the future course of oil shocks resulting from peak oil.

Can the political order face up to the challenge? There is no reason for optimism.

We are likely to see pseudo-solutions, misleading alternatives and sheer sloganeering: “energy independence,” “getting off foreign oil” and the like. All of that sheer sloganeering we have seen to this point.

The political order (which abhors political risk) tends to rely on the Biblical prescription, “Sufficient unto the day is the evil thereof.”

One of the quickest and most effective responses to the realities of a post-Peak Oil economy is to electrify and expand the main-line railroads (about 35,000 miles in as little as 6 years) and later the busy branch lines (another 35,000 miles). The railroads burn slightly less than 300,000 b/d and inter-city trucking uses about 2 million b/d. Inter-city freight includes some of the most essential uses of oil today, such as delivering food and a variety of critical materials.

Replacing 300,000 b/d with electricity is good. Replacing 2 million b/day is significant. Creating a transportation system that can quickly, reliably and efficiently transport food, critical materials and people without oil is a vital national security concern.

At the recent (2010) ASPO-USA conference, we reviewed, in our presentation on net oil exports, two examples of production peaks in oil producing regions. We also reviewed “Net Export Math” and we looked at some examples of net export declines. Finally, we reviewed our projections for net oil exports from the top five net oil exporters in 2005, followed by two scenarios for global net oil exports. In this paper we will briefly review the highlights of our presentation.

WASHINGTON (October 12, 2010): Over three jam-packed days at the sixth annual Conference of the Continue Reading

Five years ago Robert Hirsch headed the team that produced the first US government-sponsored report discussing the consequences of declining world oil production. The team which wrote the original report, Peaking of World Oil Production: Impacts, Mitigation, & Risk Management, is now out with a book that discusses the current state of the world energy situation and what we can expect in the decades ahead. Developments during the last five years have sharpened the team’s appreciation of the imminence of the coming decline in world oil production. The first report, written five years ago, discussed what could be done to mitigate the situation if steps were taken 20 and 10 years before the decline in oil production started.

What do former Green Party Presidential Candidate Ralph Nader, Rear Admiral Lawrence Rice, former secretaries of defense and energy Dr. James Schlesinger, Human Rights and Environmental Campaigner Bianca Jagger, former CIBC Chief Economist Jeff Rubin, and Republican Congressman Roscoe Bartlett have in common?

The Northeast US, where I live, has a particularly acute sensitivity to oil prices because 82 percent of the households heating entirely or partially with oil are in this region. Natural gas lines simply don’t go out to many exurban or rural areas in the Northeast, so in Maine, Vermont, New Hampshire and in Northern New York, a disproportionate percentage of the population heats their homes with oil.

In years past, there was considerable uncertainty in my mind about when the decline of world oil production might begin. Recently it became clear to me that it’s going to be sooner rather than later. I believe that the onset of the decline of world oil production is likely in the next two to five years. And when I say “oil,” I mean all liquid fuels.

Peak Oil Review: Saudi Arabia is obviously yours and everyone’s kingpin producer.

Smith: Saudi Arabia has been the world’s main swing producer. Since 2006 when I developed the slides, Saudi Arabia has increased its production capacity; a lot was planned at the time, but they’ve been quite proactive in investing in their industry.

Peak Oil Review Team: Could you share a little about your background?

Michael Smith: I was once a geologist, and worked with oil and gas consultancies and companies after graduating from Oxford University in the UK with a PhD. I had worked in most parts of the world when, at the turn of the millennium, I started my own company Energyfiles, focusing on oil and gas production, consumption and

How high up the ladder did his viewpoints climb? To the very top. Matt co-chaired the energy task force of presidential candidate George W. Bush in the fall of 2000. (He also shared his energy insights with staffers for a Democratic candidate earlier in the year.) Matt helped Bill White win election as Mayor of Houston, and provided advice and support to Republican presidential candidate Mitt Romney in his 2008 campaign. During a short session in the Oval Office with President Bush in early 2001, Matt shared his concerns about our emerging energy crisis. In subsequent years, he would testify before several House and Senate committees, an experience he would compare to “shouting down a well.” More recently, he gave a one-hour presentation in the Pentagon auditorium that stretched another hour with intense questioning.