IEA admits Peak Oil

Traditionally the (International Energy Agency) IEA, has shyed away from the question of peak oil, the idea that we have, or are about to hit the maximum level of global oil production, after which we will begin an irrecoverable decline. However George Monbiot, award winning journalist from the Guardian discusses the question with Fatih Birol, the IEAs chief economist. The results are interesting.




On Peak Oil and the Current Economic "Situation"
Interestingly, or perhaps amazingly almost no one has been willing to admit (or perhaps even understands) the reasons for the current global economic financial crisis. I have always been of the view that the rapid surge in energy (oil) prices created the financial conditions whereby continued "economic growth" would grind to a halt. Incidently I've been saying this for years, take a stroll through this blog site to see that. Once oil hit a certain price I predicted that global growth would slow and eventually halt. In my opinion $150 a barrel oil is what triggered the credit crisis, basically the downturn hit the most vulnerable part of the financial sector - what is now called "toxic assets".

Finally I have a reference - Reggie Abaca of Market Rap is saying the same thing.

And in case you are shocked that I'm writing about peak oil again, well, just so you know, I spent the day editing a publication on Information Ethics for inclusion in a selection of papers from the 2008 ITPNZ Research Forum. The PhD is still in the forefront of my mind. Finally, Mike Moreu's cartoon today sums a lot up. Kiwi's still seem to be in denial regarding this economic situation.

Creating 5 problems by solving 1

I remember when I was about 10 years old. The school I went to, this one summer, had a nasty wasp nest which of course held the attention of all the hubristic, testosterone ravaged lads of my age (including myself of course). The trick was to tease and irritate the wasps into a frenzy, then we'd all run around laughing slapping wasps off our legs, bodies and faces. Endless fun for 10 yr old boys.

Slowly but surely some of the lads developed and a courage that exceeded the potential of the situtation. One such boy, whose name will remain unsaid, stuck a fennel stick well into the wasp nest. Got it right in there and well fucked off the wasps. Well, within 5 seconds he was covered in a hundred or more wasps. There was little we could do as a group and he ended up in hospital for the afternoon. After that some pest eradication guys came around and killed off the nest - no more fun for 10 year old boys that summer.

I hope this summer is just as much fun.

**********
Just a few random thoughts
On another front I notice Obaid (ex Saudi Foreign Minister) has recently argued the US intervention in Iraq and it's recent murmurings of "an exit strategy" would leave Saudi little option but to take up the current US role of keeping Iranian backed Shiite militias from continuing their butchering of Iraqi Sunnis. There is already talk of Saudi providing the Iraqi Sunnis with weapons and financial support - get a feeling of deja-vue, a re-run of the Iraq/Iranian troubles.

There are faults on both sides - however it's clear that if allowed to continue a program of ethnic cleansing by Shiite death squads would be responsible for clearing out the Sunni minority within a pretty short space of time. Saudi would have little option but to intervene thus sparking a regional conflict.

We can be pretty clear of one thing. The US are unlikely to withdraw while there is any question about access to cheap oil. The US are in Iraq primarily to secure a cheap supply of the commodity that keeps the not negotiable wheels of easy motoring life in the States ticking along. If a withdrawal threatened that supply, and in all likelyhood it would then a withdrawal is unlikely.

Black Out

As I drove my son home from swim squad tonight I (indicated then) pulled into a lane just in front of a morbidly obese brain-dead male driving a very new and expensive looking Mercedes Benz two door sport version - I mean the guy was so fat I'd have sworn someone had rammed a Humvee up his arse. I was (just) doing the speed limit. It really irritated him that I didn't accelerate away with the torque that no doubt his mostly pointless piece of German engineering could. So much so that he sat about a metre or two surging closer every now and then towards my towbar as we continued the short journey home.

I laughed to myself knowing he wouldn't dare risk hitting me, I could tell he cared a helluva lot more about his wanky status symbol than his health for a start. All this rekindled my wonder as to what would become of the ignorant, impatient obese in the coming long emergency. Fat and can afford to be tasteless is in for a shock.

Something I noticed in the news this evening confirmed the almost fatalistic course of events now unfolding subtley before our very eyes. The lights went out across Europe today in an unprecedented continent wide power outage - and the world barely blinked an eye.

Richard Duncan (2000) argues we are at the beginning of what he calls the olduvai slide. Marked ostensibly by the escalating violence in the middle east, the Jerusalem Jihad, we are at the beginning of ever increasing dysfunction across global energy markets. Financial markets will follow close behind.

The power shortages in California and elsewhere are the product of the nation's long economic boom, the increasing use of energy-guzzling computer devices, population growth and a slowdown in new power-plant construction amid the deregulation of the utility market. As the shortages threaten to spread eastward over the next few years, more Americans may face a tradeoff they would rather not make in the long-running conflict between energy and the environment: whether to build more power plants or to contend with the economic headaches and inconveniences of inadequate power supplies. (Carlton, 2000)

The electricity business has also run out of almost all-existing generating capacity, whether this capacity is a coal-fired plant, a nuclear plant or a dam. The electricity business has already responded to this shortage. Orders for a massive number of natural gas-fired plants have already been placed. But these new gas plants require an unbelievable amount of natural gas. This immediate need for so much incremental supply is simply not there. (Simmons, 2000)

Civilisation came to an abrupt halt (albeit a shortish pause) for most of Europe today. A cold snap encouraged millions of Germans to turn up the heating causing the electricity grid to collapse "like a house of cards" the guardian reported.

"One power company chief said the continent had been close to a total blackout"

Duncan argues Industrial Civilisation is beholden to electricity. What will modern cities be like to live in without electricity? Millions of people packed likes sardines into highrise apartment complexes - inherently everything connected to this way of life utterly and totally depends on electricity. Yet the average punter is totally clueless in regard to the complexity, the fragility and the implications of electricity and large cities.

The reliability of the worlds electricity networks is faltering. As an individual, and in light of Duncan's compelling argument, I urge you to consider what you might do.

Richard Duncan's Olduvai Theory
http://dieoff.com/page224.htm

$80 a Barrel - Just around the Corner

Nymex Crude Futures currently trading at US$78.05

Watch for further rises at the pump by mid next week if we don't see a drop soon.

This spike has been building over the last couple of weeks. I suspect we'll see the psychological $80 a barrel mark tested. Before oil settles yet another $10 a barrel higher.

Fill up the Ford Explorer today folks.

... but don't worry people - your government has told you that oil will settle back to US$25 a barrel sometime soon and for the forseeable future.

Peak Oil and Mirage Realism
PowerLess NZ Press Release. 13 April, 2005

Realism is the philosophical notion that what our scientific theories tell us about the world are more or less, or approximately true. Scientific theories are generally considered to be the pinnacle of human knowledge. Although ultimately fallible and always up for revision the scientific method for discovering knowledge has, certainly in the West been shown to be instrumentally reliable. If the “realist” gets ill, the “realist” is more likely to visit a medical doctor than a soothsayer or faith healer.

Normatively then we might argue at least that being a realist is a position one might hold if one believes that the knowledge forwarded by our best theories is approximately true. This claim presupposes that we look toward science for answers to questions we might have about the natural world. To some extent being a realist is a matter of pragmatics. Panglosian arguments held by politicians and economists may serve to comfort us but such reassurances rarely stand up to logical scrutiny, natural laws or scientific evidence.

Optimists amongst us are plentiful, and their reassurances are familiar however, merely wishing or hoping something to be true, particularly in the face of evidence to the contrary, doesn’t make it true. We might call this position “mirage realism”. We explain and present two examples but first some background.

Oil production worldwide is close to peaking. That is, we are close to the point where the all time maximum amount of oil can be pumped from the ground. After this point it is expected that oil production will decline at a rate between 3% and 7% per annum (suggested by the empirical evidence provided from existing oil fields that are already in decline). The evidence for “peak oil” as it is called is indisputable. Oil production in a variety of regions and states that are now in decline can be predictably graphed as a bell shaped curve. The first significant example was when the United States peaked in 1971. More recently the North Sea, with Norway close at its heels have peaked and are in permanent decline. Collectively the world will follow soon.

A prominent mirage realist to emerge in recent weeks is Larry Baldock, transport spokesperson for the United Future NZ party. Mr Baldock proudly announced his plans to lay asphalt in the form of a big wide double laned freeway from Kaitaia to Invercargill. Either Larry Baldock is ignorant to the issue of peak oil, an issue that the prestigious Deutsche Bank argued last December ought to be of primary concern to forward looking politicians and company chiefs, or he is wishing it will simply go away. His ignorance does not excuse his culpability but to the mirage realist bullshit is bitumen – sadly under the spectre of peak oil a single cent spent on such a project is an investment in an infrastructure that has no future. We suggest a name change for Baldock’s party. United No Future.

Yet another mirage realist to stick his neck out this week was National’s Bryan Sinclair, Special Advisor to Don Brash leader of the opposition. We think Don Brash ought to consider seriously any future advice from Mr Sinclair given this comment in an email exchange on the subject of peak oil.

…we would be happy to receive any material (from you or from anybody else) suggesting that the forms of alternative energy that are developed (and there are obviously a number of these, already in development, including solar powered road vehicles and hydrogen powered road vehicles, but two examples) will somehow reduce the need for proper roading.

(Bryan Sinclair, April 2005)

We can only assume Mr Sinclair has decided not to participate in our knowledge society (at least certainly not the knowledge society that is predicated by any received rendering of logic).

Consider the following. Given that spaghetti junction is already gridlocked (every rush hour) with internal combustion engine vehicles, and Mr Sinclair seems to be arguing that either a demand or supply reduction in oil would not reduce the requirement for building more roads it follows that if we do not build more roads, spaghetti junction will become gridlocked with hydrogen and/or solar powered vehicles. Mr Sinclair’s mirage realism seems to extend to the ridiculous myth that the endless expansion of global economies is physically possible. Sinclair seems confident that human ingenuity combined with market forces will meet any forthcoming energy crunch or environmental emergency.

The futuristic scenario from mirage realist Bryan Sinclair will never occur because the energy equation for both hydrogen and photovoltaic solar cells results in marginal if not negative net energy returns. It takes more oil equivalent energy to make a solar cell than the cell ever returns in its lifetime. Hydrogen requires large amounts of natural gas, which we are currently running out of.

The demand for roads is directly connected to oil and the internal combustion engine. Less oil will result in less demand for roads. As oil becomes expensive and scarce and as we experience shortages, much to the National Party’s dismay cars will disappear from roads.

The godfather of mirage realism has to be the International Energy Agency (IEA) whom in the face of recent prices near US$60 a barrel oil, claims by OPEC that they are pumping at capacity, evidence that the mighty Saudi Arabian fields are peaking still hope and wish that oil will peak in 2037.

However just in case, the IEA are preparing a special report due to be released in a week or two that aims to prepare member nations (which includes NZ) about the need for urgent and extreme energy conservation measures if the worlds oil supply is disrupted or reduced by one to two million barrels per day (we currently consume 84 million barrels per day). Such bizarre measures suggested by the IEA include bans on privately owned motor vehicles, reduction of the working week and imposition of lower speed limits.

New Zealand’s energy minister, the Hon Trevor Mallard, currently frantically keen to comply with the IEA’s strategic 90 reserve day requirement by building dozens more oil storage silos will want to seriously consider the IEA’s latest report since he will be the one breaking the news to New Zealanders that “Carless Days” is not a Mexican folk singer.

Steve McKinlay
for PowerLess NZ

The Endless Supply of Oil and Other Fairy Tales

The rigour of science requires that we distinguish well the undraped figure of nature itself from the gay-coloured vesture with which we clothe it at our pleasure.
Heinrich Hertz, 1895

Common bloviated pigeon-chesting by those that believe our drive-by fantasyland will continue ad-infinitum include the following claims;

• Ho hum, heard it all in the 70’s
• Peak oil = chickenlittlism
• The stone age didn’t end because we ran out of stone
• OPEC could simply pump more oil if they wished
• The world is awash in oil
• The market will provide

Obvious logical fallacies aside the final statement has some credibility; we suspect the market will provide with rickshaws and bicycles being high on the demand list.

The point is that the mutterers of such slaver never seem able to offer any coherent argument as to how it is that the price of oil is 400% higher than it was in 1999. Nor can anyone point to the seemingly endless reserves [1] that are said to exist to meet ballooning demand. Certainly in regard to supply and demand within the oil market the empirical facts speak for themselves. None of the hubristic rants inclusive of any of the above bullet points or not, have yet been able to cool the market back to US$11bbl.

Further, all new production due to come online over the next year or two is likely to be offset by existing depletion running close to 2Mbpd per year (ExxonMobil confirm their fields are depleting at 4-6% per year) combined with existing strong demand growth [2].

Although the peak oil model is instrumentally reliable, it has been verified in all oil field production data most visibly in fields that are now in decline since it’s inception in the US in 1971, the actual peak oil date to some extent is largely irrelevant once available supply is surpassed by demand. The debate whether the peak oil model is “true” or “real” or not is orthogonal to the present demand/supply issue. You can happily ignore peak oil at the moment, but you can’t ignore the probability that demand is outstripping supply.

Nevertheless it is a simple observable fact that the peak oil model is descriptively accurate in regard to the oil production cycle. Normative appeals to market principles or human ingenuity do not change geological facts. Furthermore advances in technology serve only to exploit oil reserves at a quicker rate but surely depleting resources at a quicker rate does not solve the depletion problem. The market may well provide, we can be sure it won’t be providing cheap oil, even the flat-earthers are beginning to reluctantly concede this point.

The recent “Hirsh Report”[3] to US Department of Energy describes the economic, social and political costs of peak oil as unprecedented. Hirsh in fact questions the ability of the market to provide adequate solutions. The report looks at the Peak Oil problem from a risk management perspective, Hirsh contending that dealing with Peak Oil will cost trillions of dollars and require years of intense effort. Transitioning to a more fuel-efficient national automobile fleet for example is expected to take more than a decade.

Yet in respect of Peak Oil, from our Government we hear a divine silence. We go about building more roads and infrastructure, we make predictions about how well the economy will do next year, and the year after. The Government has ignored peak oil’s warning signals; many other political parties are equally ignorant.

According to recent analysis on Aljazeera’s web site (Oil Prices Confound Experts, Adam Porter) industry analysts and other “experts” are befuddled by the fact that the price hasn’t fallen. "OPEC isn't running fast enough to meet this train of demand that's growing without any sign of a slowdown," said Gal Luft, executive director of the Institute for the Analysis of Global Security in Washington.

The International Energy Agency (IEA), bastion of positivism, beholder of distended technological hubris are showing signs of worry. This warning was issued by the IEA last Friday, “The reality is that oil consumption has caught up with installed crude and refining capacity," the Paris-based agency said. "If supply continues to struggle to keep up, more policy attention may come to be directed at oil demand intensity in our economies and alternatives”[4]. This revelation comes on the back of upward demand growth and downward discovery adjustments made by the IEA earlier this year.

The typically ultra-optimistic IEA, panderer to neo-classic economic dogma while powerless to do anything about oil price volatility, seem to be suggesting that a crisis is almost upon us. If as Hirsh suggests changeovers will cost (at least in New Zealand terms) many billions of dollars and take a decade or so implement we are likely to see the emergence of serious oil induced problems quite soon. Hirsh cites higher oil prices and oil price volatility as advance signs of peak. The final warning signals are now imminent.

Yet the cavalry is not appearing on the horizon. Evidence is emerging that Saudi Arabia are simply unable to increase production. There have been marked declines in monthly production figures from the peninsula since the end of 2004. If this turns out to be the case and Saudi has peaked then according to Matt Simmons [5] the world has peaked.

A similar scenario faces the FSU. Production figure declines have persisted for several months running. It is progressively evident that production increases both within OPEC and non-OPEC states will prove increasingly difficult to maintain. The limits are being reached.

No, the Stone Age didn’t end because we ran out of stone; we found something better, we replaced stone with iron but this transition took centuries. This time according to Dr Hirsh we have about a decade if we are lucky and a replacement for oil is yet to be identified.

Those disbelievers who feel the need to ridicule the peak oil story ought consider this. If by hallucination or some stretch of the imagination we turn out to be wrong then we merely look silly. However if the detractors are wrong, if the fountain of eternal energy, whatever that might be, is not found soon then the western civilisation we all know and love, contingently reliant upon oil to feed, clothe, house and medicate itself is about to end.

[1]. In 2004 the total world discovery of oil was 7Gb (a total of 3 months or so supply on the world market). 2Gb were in deep-water finds and the cost of exploration alone (not including development and production) exceeded the current net present value of the oil discovered. The world consumed 30Billion+ barrels of oil in 2004. Economies of scale are disappearing as the oil found is spread across greater numbers of increasingly smaller fields. Source – Association for the Study of Peak Oil and Natural Gas, Newsletter #50, February 2005.

[2] IEA report demand growth running at 2.2%, other reports suggest 3%+ is a more realistic figure.

[3]. The Hirsh Report Executive Summary (and link to the full report) is available at www.energybulletin.net/4638.html

[4]Financial Times, Mar 11, 2005. news.ft.com/cms/s/f20cfb8a-920d-11d9-bca5-00000e2511c8.html

[5] Matt Simmons, Founder and Chairman of the worlds largest energy investment bank, Simmons and Co. International. Advisor to the 2001 Bush-Cheney Energy Task Force.

Steve McKinlay
PowerLess NZ

Peak Oil and The Sociology of Knowledge
Original Article posted on Scoop 2 February, 2005
A Peak Oil Primer
This article also now appears on Energy Bulletin

Anyone who wants to drag in the irrational where the lucidity and acuity of reason still must rule by right merely shows that he is afraid to face the mystery at its legitimate place. Karl Mannheim (1952).

The significance in differences in argument between what Colin Campbell terms the “flat-earth fraternity” and Peak Oil theorists is profound.

Flat-earthers typically dismiss arguments that global oil production will peak (very soon) and subsequently decline in favour of arguments claiming that vast reserves of oil exist (somewhere) and can be exploited well into the future thus securing economic growth for decades to come. Other variations from the flat-earthers include such arguments from the smooth transition to a “hydrogen economy” to the bizarre claims in the absence of any knowledge of the laws of thermodynamics, that modern supply-side economic theory combined with technology will somehow magically produce oil or some cheaper more efficient alternative to the dictates of market demand.

Peak oil’s empirically based claims can countenance no such sociological or economically arational challenges. It seems today for all purposes that there is little or no spare oil production capacity world wide, we currently produce about 83 Million barrels per day. Yet in today’s “deficits don’t matter” world everything but everything is blamed for oil supply concern except geological limitations.

Continued economic growth predicated by cheap and abundant oil viewed through the perspective of such an inherently flawed argument seems to ignore all prejudiced, obscurantist and irrational baggage. Upbeat claims regarding abundant oil by Oil companies, OPEC, Governments, the International Energy Agency, and Automobile Associations amongst others obtain a legitimacy, which obviates the need to look at the social milieu for an explanation as to what is actually going on.

History however clearly instructs us that rationality (or in this case the lack thereof), choice and belief inevitably depend upon the existence of certain social structures and norms. Beliefs across groups of people can emerge under specific intellectual conditions informed by empirical problems and guided by respected research traditions. Such a methodology unfortunately rarely speaks to the social classes chock-full of pregnant confusion, largely ignorant to dynamics of energy supply, consumption and its relationship with societal well being. In other words, the masses will suck up mainstream media propaganda that we need to rid the world of terrorists and that oil will return to US$25 per barrel very soon. Continue your recreational shopping at your pleasure.

In many ways it is perhaps an historical curiosity that science was touted as having enormous practical and utilitarian value in informing and inevitably improving the physical conditions of life. This approach however in the face of mass consumption, aspirations and expectations of certain standards of living seems to carry no weight anymore. Instead many of us look to economists, politicians and other soothsayers to assure us that the science in regard to Peak Oil is wrong, if you want to know what’s happening to oil supply you’re better off reading your local Financial Times than consulting an oil geologist. The fact that oil reserves equivalent to five or so Saudi Arabias will be discovered and developed within a decade or so and that the oil price per barrel will return sometime soon to US$25 dollars per barrel are a given.

PowerLess NZ urge New Zealanders and politicians unafraid of ditching their dogmas to rationally question current assumptions. Consider our economic system, predicated on debt, fractional-reserve banking and fiat currency. Much of what we consider “value” in New Zealand is not determined by anything at all measurable or tangible it is merely a perception of an expectation of future use or gain.

This system is necessarily dependant upon limitless infinite growth to survive. Rational thought ought to inform all of us that this scenario is an impossibility theorem. Growth is not possible without energy and there is nothing on the market that can currently replace oil and natural gas. Without oil and natural gas our financial system is doomed. Several respected independent scientific sources predict Peak Oil, the time at which the demand for oil exceeds the available supply, to occur between 2005 and 2007. Richard Heinberg argues the answer to this dilemma is the one no one wants to hear. So we sit, and wait, and assume, and deny.

Steve McKinlay (c)
http://www.oilcrash.com/