PEAK OIL STILL COMING

Almost the entire energy world agrees: Global oil supplies will – sooner or later – be inadequate to the needs of the world’s population. The question: When do supply limits begin imposing observable economic constraints?

Answers range from “it is already happening” to “nobody knows” and makes for a challenging debate, perhaps never moreso than in these days of plunging oil prices.

The Oil Drum, one of the web’s liveliest and most intelligent pages, documents that debate. One the contributors there recently commented on the burden that has beset those who have tried to warn the world community a change called Peak Oil is coming.

From The Problem with Making Predictions: “Prophecy, particularly when it deals with the near term future, runs the risk of being corrected by the actual turnout of events. The ups and downs of energy demand, and available supply–-particularly when tied to the economic fortunes of nations, can make logical projection under one condition, but become apparently hopelessly in error when that condition doesn’t happen. Thus, at the moment, with the declining price, and apparent glut of oil, the public no longer feels that there is a crisis; the credibility of those forecasting a crisis is damaged, and can only be reconstructed over a longer period of time and changing circumstance…”

Translation: Theories about oil supplies peaking have not been proven wrong, they have been proven premature.

The naysayers on Peak Oil are those who have long studied the petroleum industry, know available supplies (and prices) have always fluctuated and know the end of oil supplies and oil dependency have been predicted many times.

Peter Jackson, senior oil industry analyst, Cambridge Energy Research Associates and author, Why the Peak Oil Theory Falls Down: "What I have a problem with is that global production will peak in the very short term and then the tank will run dry very quickly thereafter. I don't think it's quite as black and white as that. I mean, clearly we're dealing with a finite resource, but we see strong growth in oil supply unfolding in the next few years, and there is a strong inventory of new projects of oil already discovered…"

What Jackson has “a problem with” are folks like those in Crude Awakening: “We are a group of concerned citizens in Austin, TX, dedicated to learning about the coming worldwide oil production peak, its timing, potential consequences and the preparations needed to reduce its impact. We share what we learn with each other and the Austin community…about affordable oil, the resource upon which our lives have been built, and the fact that it is rapidly depleting. It is our responsibility to ourselves and future generations to start making the right changes now in an effort to minimize the chaos and suffering that is certain to follow if we stay on our current path…”

Crude Awakening. From bml via YouTube

Crude Awakening sees itself as a catalyst to increased awareness. Jackson doubts their sense of urgency.

Yet a recent International Energy Agency (IEA) report, cited by the guest speaker at the November Crude Awakening meeting, seemed to validate everything they believe.

Michael Osborne, representative, Austin Energy: "I don't know if y'all have read this or not…but the first paragraph of the executive summary says, 'The world's energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable. But that can and must be altered.' "

The IEA’s recognition of peaking supplies is dramatic.

Jeremy Leggett, CEO, Solarcentury: "The IEA is very constrained in what it can say - by the demands of its constituent governments - so you have to read between the lines. We believe that peak oil will come about in 2013 at the latest but the real concern from the IEA is the adjustment of production figures…"

Normally conservative, the IEA last year said the rate of decline of older oil fields was 3.7% but now says the rate of decline is 6.7% and the peak could come in the 2020 to 2030 period.

John Hemming, chairman, UK All Party Parliamentary Group on Peak Oil and Gas: "The penny has finally dropped - geological issues matter as well as political and economic. The IEA - unlike our government - appears to be leaving cloud cuckoo land finally…"

Probably the most widely known proponent of the imminent peaking of oil is investment banker Matt Simmons. He is completely unequivocal.

Matthew R. Simmons, CEO, Simmons & Co. International: "I am saying the sky is falling. If we ignore peak oil; worse, if we laugh about it, continue consuming, we will have a massive shortage…Energy reality, if you take off rose-colored glasses and just study data, is that crude oil in most non-OPEC countries is now in decline, and in too many countries in steep decline. Virtually all of the OPEC producers, with the exception of Angola, are really struggling to keep their production flat…"

To ask who in the debate is more accurate is to not ask the right question. As the Oil Drum author pointed out, prediction is difficult. As Yogi Berra would add, prediction about the future is especially difficult.

The right question is very much like the right response to “When did you stop beating your spouse?”

Don’t answer. Ask why the question came up.

Click to see the trailer.

Listen to the NPR broadcast.

‘Peak Oil Theory’ Demands Energy Alternatives
John Burnett, December 13, 2008 (NPR)
and
The Problem with Making Predictions
Heading Out, December 14, 2008 (The Oil Drum)
and
Global oil supply will peak in 2020, says energy agency
Terry Macalister and George Monbiot, 15 December 2008 (UK Guardian)

WHO
Crude Awakening, Peter Jackson, Michael Osborne, Matthew Simmons, International Energy Agency (IEA) (Fatih Birol, chief economist)

WHAT
Peak oil: Many still believe the inability of oil supply to meet the demand necessary to sustain life as it is led in the developed world will be the determinative factor in 21st century history, despite the current temporary reversal of fortune.

The 1st thought is to ask how low it will go but...(click to enlarge)

WHEN
- The IEA now sees the peak coming in 2020 to 2030 period.
- Crude Awakening sees the peak as imminent and sees it changing the way society works.
- Major oil companies, the Organization of the Petroleum Exporting Countries and the U.S. Energy Information Administration see a plateau decades away, probably after 2050.
- Crude Awakening meets monthly.

WHERE
- Crude Awakening meets in Austin, Texas.
- There are many such groups around the U.S. and around the world.
- Opponents of the peak oil idea refer to major new deep-water projects in Brazil, Angola and Nigeria and the expectation of big unconventional supplies in Canada and Venezuela.
- Peak Oil proponents like Simmons say the world's giant oil fields (examples: Saudi Arabia’s Gawar, the UK/Norwegian North Sea ,Mexico's Cantarell) are all in decline.

WHY
- The single biggest fact validating the peak oil theory is that easy to get at oil sources are disappearing.
- Oil industry executives don't doubt that world oil production will peak. The debate is over when and whether the peak will come too soon fore New Energy and new technologies to ease the transition.
- The IEA says that because the global economy is dependent on oil, sudden peaking supply could cause economic, social and political disruption.
- Crude Awakening’s 3 stated intentions: (1) Relocalization, the local production of food, goods and services; (2) Diversification of the energy mix to achieve less dependence on the rapidly-diminishing resources of petroleum and other fossil fuels and more New Energy; (3) Wiser use of the remaining petroleum resources.
- Group discussions cover everything from bicycle maintenance to the best hybrids to gardening to the best local produce to the installation of solar systems.
- The group’s members have each had a personal crude awakening.

...With this kind of field decline, supplies will fail and prices will rise. (click to enlarge)

QUOTES
- Brian McNerney, lieutenant colonel – retired, U.S. Army: "When gas prices peaked here about six months ago, we had the largest [Crude Awakening] meeting in July. We had about 25 people show up…"
- Paul Karagas, semiconductor industry worker and Crude Awakening member: "I've been aware of peak oil for about three years now. And since then, I've personally changed my life. I got rid of my cars and get around by bicycle 90 percent of the time…"
- Matt Boyd, geologist, Southwestern Energy: "People don't understand how serious the problem is. Like [Simmons] pointed out, the declines in Mexico are huge, the declines in Venezuela are huge…"
- Mike Cox, energy industry professional, Schlumberger Business Consulting: "I think he's a little bit on the aggressive side in believing that we've already peaked…But I do agree we have that on the horizon, and there's not an infinite amount of oil and at some point we'll have to deal with the declining curve."
- Andrew Keene, financial professional and energy lender: "I think the world is definitely running out of oil…I don't think the predictions that Saudi Arabia can replace 15 to 35 million barrels a day is feasible. And we need to consider some alternatives and some other options."