VIEW FROM THE PEAK (OF OIL)

A NY Times discussion of Peak Oil issues frames the story very helpfully: It’s not how much oil is left, it’s how expensive the oil left is going to be.

World population will grow 50%, to 9 billion, by mid century. Cars and trucks will double in 30 years to 2+ billion. Passenger jetliners will double to 36,000 in 20 years.

World oil consumption will increase 35% by 2030, requiring 11 billion more barrels of oil yearly. It won’t come as easily or cheaply as the 85+ million the world is currently using every day.

Jeroen van der Veer, chief executive, Royal Dutch Shell: “…the energy outlook does not look rosy.”

This really is NOT the problem...(click to enlarge)

Since the dawn of the age of the internal combustion engine, the world has consumed a trillion barrels of oil. Good estimates say there are another 1.2 trillion barrels of “conventional” reserves. Most of it will come from violent places and places hostile to the U.S. and – at present rates of consumption – will be used up in less than 30 years.

The next trillion would only come from sources like the Arctic Ocean and oil sands or shale and countries that simply won’t let their last oil go to the U.S. Corn ethanol? The entire U.S. corn crop might fill 20% of U.S. needs. Coal to oil? It probably takes more energy to make it than it produces, it would choke the world and it wouldn’t likely last long enough to take the trouble.

And present rates of consumption are nothing compared to what is coming. Developing nations everywhere are booming and they are buying cars and building highways. China now uses oil for 19% of its energy but is expected to double its oil consumption by 2030. It went from ~5.5 million cars to ~37 million cars between 1990 and 2006, will supplant the U.S. as the world’s biggest car market by around 2015 and will have around 300 million cars by 2030.

If the Chinese use oil in 2030 like the U.S. uses it now, the world will need at least 5 more Saudi Arabias. (Ain’t gonna happen.)

India is at China’s heels.

Is the U.S. racing to adapt to the new circumstances? Right. It took Congress 30 years to pass a law upping the U.S. auto fleet mileage requirement to get to 35 mpg by 2020. The EU’s PRESENT requirement is 40 mpg and Japan’s is 35 mpg.

Vaclav Smil, prominent energy expert, University of Manitoba: “The country has been living beyond its means…The situation is dire. We need to do relative sacrifices. But people don’t realize how dire the situation is.”

In a way, that’s actually good news. Why? Because of the truth in what James Schlesinger, first U.S. Secretary of Energy, pointed out. All the U.S. has for energy policy is “complacency or crisis.”

Wouldn’t it be astute to have a transportation fleet that runs on electricity and a clean electric grid supplied by wind and sun and waves ready for the inevitable?

...THIS is the problem. (click to enlarge)

Barreling Along: The Big Thirst
Jad Mouawad, April 20, 2008 (NY Times)

WHO
International Energy Agency (IEA)

Read more. (click to enlarge)

WHAT
What do oil prices [April 22, 2008, WTI Cushing Spot, 12:02: $119.40] say about oil supplies?

WHEN
- 1859: U.S. oil production began in earnest.
- 1901: The Spindletop elephant oil field in southeast Texas turned the U.S. into an oil giant.
- 1939-1945: The U.S. supplied the oil that fueled the Allies to victory over oil-poor Germany and Japan.
- 1950s: U.S. production falls behind Mid East production.
- 1970: U.S. oil supplies peaked.
- 2005-2010: The end of cheap oil.

At current prices, they'd up their output if they could... (click to enlarge)

WHERE
- Most OPEC nations do not reveal enough to be certain but they do not seem to be able to up their production.
- Production in the North Sea and Alaskan fields is falling off.
- Russian production is falling off.
- Mexico’s richest fields are failing.
- Iraq and Nigeria may have oil but they are too violent to keep production up.

WHY
- The causes of high oil prices are many: the weak dollar, the threat of terrorism, oil commodity speculators, interruptions in the supply chain upstream at violent oil fields and downstream at overburdened refineries, competition from China and India for oil, to name a few.
- Total world energy demand, all sources, is expected by the IEA to go up 65% in the next 20 years.
- OPEC represents ¾ of the world’s reserves but are not upping production.
- Despite $100 billion in E & P investment, the five largest international oil companies discovered less oil last year than they pumped.
- The U.S. was the only nation in the world that did not reduce its oil consumption during the energy crises of the 1970s.

...And so would Russia. (click to enlarge)

QUOTES
- Jan Stuart, global oil economist, UBS: “This is the market signaling there is a problem…that there is a growing difficulty to meet demand with new supplies.”
- Rex Tillerson, chairman, Exxon: “There are plenty of resources in the globe…[The difficulty is] just continuing to have access to all of the opportunities.”