PEAK OIL ENVISIONED, EXPLAINED

An excellent, long, thoughtful essay not easily deconstructed. But here is a bit of it. Klare’s credentials are substantial.

And to go with this post, here is “Peak” authority Matthew Simmons’ August 18 interview: All the Canaries Have Stopped Singing.

A new energy pessimism emerges
Michael T. Klare, August 18, 2007 (Asia Times)

WHO
Peak Oil Theorists M King Hubbert, Kenneth Deffeyes, Richard Heinberg, David Goodstein, Paul Roberts



WHAT
Recent government and energy industry reports indicate the Peak is near.

WHEN
- The signs are emerging daily. An example of “tough” sources: Kazahk’s Kashagan operation was postponed from 2005 to 2010.
- IEA report: world economic activity will grow 4.5%/year and oil demand will rise 2.2%/year per year. 2007 oil consumption is 86.1 million barrels/day; 2012 oil consumption will be 95.8 million.

M. King Hubbert, petroleum geologist.

WHERE
Difficulties in Iraq, Nigeria and the deep Gulf of Mexico also exemplify “tough oil.”
WHY
- July 27 Wall Street Journal article: "Oil profits show sign of aging" -- investors expect profits to drop as production costs rise and fields decline.
- Peak-oil, the prediction (petroleum geologist M King Hubbert, 1956) -- worldwide oil production would (and did) rise until half the world's oil was exhausted and then decline.
Deffeyes and others confirmed this.
- What is left is tough oil, far offshore or deep underground, scattered, in unfriendly, politically dangerous, or hazardous places.
- "Medium-Term Oil Market Report" (July 8 International Energy Agency (IEA) for Organization for Economic Cooperation and Development (OECD) report) -- filled with statistics and technical analyses, the report concluded that world oil demand will keep rising quickly and new oil sources will not keep pace so there will be shortfalls within five years.
- "Facing the Hard Truths about Energy" (National Petroleum Council (NPC), an oil-industry association) -- widely praised as "balanced" but concludes the oil to meet world demand will cost $20 TRILLION in new investment: "A stable and attractive investment climate will be necessary to attract adequate capital for evolution and expansion of the energy infrastructure." (NewEnergyNews: Unlikely.)

click to enlarge

QUOTES
- US Department of Energy, 2004: "Based on [our] analysis…[we] would expect conventional oil to peak closer to the middle than to the beginning of the 21st century."
- Peter Hitchens, analyst: "All the oil companies are struggling to grow production…[Yet] it's becoming more and more difficult to bring projects in on time and on budget."
- John Kildruff, a perfectly sober analyst at futures broker Man Financial: "We're only a headline of significance away from $100 oil."
- Klare: “…what's actually needed is 5 million barrels of new oil each year, a truly daunting challenge, since almost all of this oil will have to be found in Iran, Iraq, Kuwait, Saudi Arabia, Algeria, Angola, Libya, Nigeria, Venezuela, and one or two other countries. These are not places that exactly inspire investor confidence of a sort that could attract the many billions of dollars needed to ramp up production enough to satisfy global requirements…Buckle your seat-belt. Fill up that gasoline tank soon. The future is likely to be a bumpy ride toward cliff's edge.