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Article Submissions
We now accept peak oil related article submissions HERE. This is your opportunity to let the world know your thoughts, opinions and fears about the energy crisis. Publishing your articles here has several advantages. We will promote your article for you to ensure it gets read by as many people as possible. It is an excellent opportunity for authors who want to increase their online name visibility and showcase their writing skills. We also allow HTML in our articles so that you can share valuable online resources. New articles are published directly onto the main page HERE. Authors will receive a contribution link on our menu.

Daily News Feeds
In an effort to keep our site as up-to-date as possible we have integrated an RSS feed reader HERE. Articles on this page are automatically published using RSS feeds from several key peak oil websites. We provide a direct link to the article on the originating website, and give credit to their contribution by placing a link to their main page (down on the right menu bar of this page). This provides you with updated news links and easy access to updates from other peak oil sites.

RSS Feed Submissions
If you know of a feed that we should add to our site you can suggest it HERE. If you are a webmaster please consider linking to us before you suggest your site.

Headlines from the Peak Oil Blogosphere
We have established a partnership with Mark Brandon from First Sustainable to offer this peak oil feed tool. You can see a working example on the right menu of peak oil news. This feedbox was created for webmasters who want to automatically display the latest peak oil headlines on their site. The goal of this tool is to raise the profile of Peak Oil Blogging through cross-promotion. The feeds included contain the most widely followed, high traffic blogs in the Peak Oil blogosphere. By displaying this tool, you will not only gain exposure to your headlines, but also increase your link popularity and traffic. Get the feedbox code HERE.

Link Exchange Requests
Peak Oil Resources has a number of links to online energy related websites worth a look. Link exchanges are a way for related websites to network with each other for exposure. If you want to suggest a site please feel free to submit the address HERE. We accept peak oil related submissions only. We are more likely to accept your submission and publish your link if you have already placed a link to us on your site. Use the description part of the submission form, or email us (bottom of this page) to request other cross promotion arrangements.

Thanks to the intergovernmental role of the IEA, the World Energy Outlook is in a unique position to provide objective energy analysis and energy projections covering the entire world, grouped as: OECD (USA, Canada, Mexico, EU, Japan, Korea, Oceania), Developing Countries (China, India, Indonesia, Latin America, Brazil, Middle East, Africa) and transition economies (Russia and eastern Europe).

The report is sectioned into three main parts:

1. Reference Scenario
The Reference Scenario presents projections for supply and demand of oil, gas, coal, renewables, nuclear and electricity to 2030. It also assesses energy-related carbon dioxide emissions. The projections incorporate the latest energy-market and price developments as well as macroeconomic conditions. It covers 21 separate regions and the world as a whole. Includes key assumptions, global energy trends, oil market outlook, gas market outlook, coal market outlook and power sector outlook.

2. Alternative Policy Scenario
The Alternative Policy Scenario is built on policy measures such as energy efficiency and increased use of renewables and nuclear. The Alternative Policy Scenario contained in the WEO 2004 showed that there is a large scope for reducing energy consumption and CO2 emissions. To deepen the analysis of developing country potential, the WEO 2006 contains separate models and analysis for China, Russia, Brazil, India and Indonesia. The analysis also describes the cost implications of new policies. Outlines how to map a new energy future, assess the cost effectiveness of alternative policies, deepen global analysis by sector and how to go beyond the alternative policy scenario.

3. Focus on Key Topics
This year’s report focuses on some key energy related topics. The report examines the global economic impact of high energy prices by looking at current trends in oil and gas investment. There is an emphasis on nuclear power and the likely worldwide expansion of this dangerous technology. Other key topics of the report is the potential of biofuels and energy for cooking in developing countries, as well as a focus on Brazil’s energy future.

Some questions the 2006 report answers:

• Is the economic reaction to high energy prices merely delayed?
• Is oil and gas investment on track?
• Are the conditions shaping up for a nuclear energy revival?
• Can biofuels erode the oil monopoly in road transport?
• Can 2.5 billion people in developing countries switch to modern energy for cooking?
• Is Brazil learning new lessons or teaching the world?

The WEO report contains two types of analysis:

1. Detailed global energy projections covering supply and demand by fuel and sector to 2030 and beyond in even-numbered years. Also included are in-depth analysis on key countries: India, China, Russia and Brazil.

2. Special topics concentrating on timely issues and challenges facing the energy sector in odd-numbered years including: energy subsidies, uranium supply, hydrogen, CO2 sequestration, energy investment projections and the importance of the Middle East and North Africa region.

The IEA World Energy Outlook explores both possible energy futures: the under-invested, vulnerable and dirty future and the clean, clever and competitive future. It responds to the G8 by mapping a new energy future and contrasting it with current economic trends. The 2006 WEO report also shows how to change the energy economy and demonstrates the benefits of energy efficiency using extensive statistics, detailed projections, analysis and advice.
Ordering Information: IEA Publications Bookshop

Even though the Canadian economy is no less dependent on hydrocarbon energy than ours, Canada has been drilling as many wells as necessary to keep the high-maintenance American economy humming. If this pedal-to-the-metal production policy were applied to a non-strategic product like, say, maple syrup, few people would care about the consequences. But there is nothing on the horizon to replace the nonrenewable high-density energy sources that Canada so generously sends our way.

This begs the question: how long can Canada go on behaving like America’s most obedient energy colony?

According to David Hughes, a researcher for the Geological Survey of Canada, it will not take too long. Speaking before the World Peak Oil Conference held in Boston, Hughes painted a remarkably pessimistic picture of Canada’s energy future, especially regarding natural gas. Despite record drilling activity, natural gas extraction volumes have slipped from the peak set in 2002, and output per well is now declining at an annual rate of 28 percent. Put another way, energy companies must add 3,000 more wells in 2007 on top of the 15,000 now in production just to keep output from diminishing.

That would be a daunting challenge even if there were spare rigs and drilling crews standing by. As it now stands, there is no spare capacity of this sort anywhere in North America. With only eight years of proven reserves left in Canada, Hughes suspects that natural gas output is about to fall off a cliff. Barring a miracle or two, Canada will soon experience challenges in providing for its own citizens, let alone producing surplus volumes bound for American furnaces.

A potentially wrenching resource conflict is now brewing on our continent, thanks to the North American Free Trade Agreement (NAFTA), under which Canada effectively gave up sovereignty over its fossil energy inheritance. As a signatory, Canada is prohibited from cutting back energy exports, even in the event of a domestic supply crunch. But how long would Canada honor its obligations under NAFTA if doing so resulted in its citizens freezing to death? American policymakers would be wise to explore how that scenario might play out.

If that weren’t enough, natural gas is also the key to expanding the production of oil from the tar sands of northern Alberta, the only oil-producing region left in North America that can increase output. The natural gas is the only available fuel for producing the pressurized steam needed to separate bitumen, a low-grade oil, from sand. Shrinking natural gas supplies would quickly reduce the flow of bitumen into the U.S., further complicating Canada’s energy dilemma.

The irony of sacrificing a premium energy source to make more low-grade fuel for export was not lost on Hughes, who closed with a quote from a Canadian energy executive. “Using natural gas to produce oil from tar sands is akin to turning gold into lead.”

» Source: The Rock River Times

Most North Americans drive two vehicles to work and spend a great deal of their time in traffic. People come home after a long day’s work completely exhausted because of the extra travel time. On weekends and evenings even more time is spent commuting as people drive around completing errands and shopping for consumer products (often produced from petroleum). The consumer society is creating mass fatigue and stress due to our desire to meet the consumption levels of our Neighbours. Most households require two large incomes in order to sustain a typical middle-class lifestyle.

All of this is made possible by cheap energy. Suburbs, large homes, electronics, exotic foods and grocery store chains, travel and hobbies are all made possible by inexpensive resource supplies. While nobody is certain how long these resources will allow us to sustain our way of life, it is fact that North Americans (Canada and the USA) consume approximately 35% of the world’s energy resources, while we only hold about 5% percent of the world’s population. The dangerous part of this energy disparity is that many developing nations are working desperately to meet our consumption levels and live similar consumer lifestyles.

It is only fair that other nations would want access to the same types of homes, education, cars, health and luxury consumables that we enjoy. The problem is that this type of global consumption is not possible. It would take more than six planets with the same resource supplies as earth in order to sustain a global suburban lifestyle. Demand for luxury consumer items is currently booming in countries such as Brazil, China, India and Russia.

If the global demand for energy to fuel industry, homes and transportation continues to rise at current levels, world oil reserves and energy resources will no longer be able to meet demand. When this peak (which many believe we are already experiencing) occurs there will be an inevitable economic slowdown resulting in a recession and possibly even a worldwide economic depression. As nations struggle to meet rising energy needs, we will likely see a rise in resource related disputes and even an increase in military conflicts.

Solutions
North Americans need a new energy strategy, one that focuses on energy efficiency and conservation. It has been proven much cheaper to invest in energy efficiency plans than to build more energy generating facilities such as power plants. Homeowners are much better off re-fitting their homes than purchasing bigger heating, cooling or energy production technologies. Conservation and efficiency practices can be as simple as improved insulation standards, replacing light bulbs and appliances, or lowering consumption levels.

Some interesting energy efficiency facts:

• Fuel-efficient cars will cut fuel, finance and operating costs while reducing harmful environmental emissions.
• Home heating and cooling costs can be cut in two by ensuring proper home sealing and insulation.
• Switching to compact fluorescent light bulbs reduces energy consumption levels by 80%.
• Replacing old appliances such as refrigerators and washing machines can improve efficiency levels up to five times.
• Water consumption can be reduced by half with the installation of low-flow shower and faucet fitting technologies.
• On-demand water heaters can reduce the cost of hot water by 50%.
• Hot water costs can be further reduced halfway by installing a solar thermal water heater.

The world is at or near what’s called “Peak Oil,” after which the world’s oil production will steadily decline. The exact date doesn’t really matter, Grinzo says. The important thing is that future oil deposits will be harder to reach (five or six miles below the ocean surface, for example) and of lower quality. We won’t run out of oil, Grinzo says, because as the price goes up, we will replace it with other fuels now considered pricey. “Can we live with $100 barrel oil? Yes. It won’t be fun, but we can do it,” he says.

And at that price, combinations of solar power (made from thin film - silicon free - solar panels that are cheaper to install) and wind power will become more viable. The revolution in alternative fuel cars is just beginning, he says, and don’t be surprised if the next generation of hybrids are “plug-ins” that can be recharged at home, and which will gradually run farther and longer on battery power before kicking over to the gas tank.

The oil shortages will propel a greater reliance on nuclear and coal-fired electricity generating plants. That will create problems - disposing of even more nuclear waste, for one, and limiting the pollution from burning coal. But very little of today’s electric power comes from oil, he says, so the shift to electricity to power cars and heat homes is a natural.

There are other promising developments, Grinzo believes. Take cellulosic ethanol - which uses a refining process that can turn any plant material into ethanol. “The emphasis is on genetic engineering, which may produce plants better suited for ethanol production,” he says. Already government research reports that fast-growing, low maintenance poplar trees are an excellent source of ethanol.

“The biggest untapped resource is still conservation, he says. “There’s so much low-hanging fruit.” People know about the easy steps but don’t always take them. Use compact fluorescent light bulbs, wrap your hot-water tank in insulation, and turn off the pilot light on gas fireplaces during the warm months.

“The political left will hate it because of the use of more nuclear and coal,” Grinzo says. “The right will hate it because of tax breaks to promote solar or wind use.” But voters should become “independent journalists,” checking the facts and supporting the changes that will allow us to live well with less oil.

» Source: Democrat and Chronicle

The WWF began its Living Planet Reports in 1998 to show the state of the natural world and the impact of human activity upon it. Since then we have continuously refined and developed our measures of the state of the Earth.

And it is not good news. The Living Planet Report 2006 confirms that we are using the planet’s resources faster than they can be renewed - the latest data available (for 2003) indicate that humanity’s Ecological Footprint, our impact upon the planet, has more than tripled since 1961. Our footprint now exceeds the world’s ability to regenerate by about 25 per cent. The consequences of our accelerating pressure on Earth’s natural systems are both predictable and dire. The other index in this report, the Living Planet Index, shows a rapid and continuing loss of biodiversity - populations of vertebrate species have declined by about one third since 1970. This confirms previous trends.

The message of these two indices is clear and urgent: we have been exceeding the Earth’s ability to support our lifestyles for the past 20 years, and we need to stop. We must balance our consumption with the natural world’s capacity to regenerate and absorb our wastes. If we do not, we risk irreversible damage.

We know where to start. The biggest contributor to our footprint is the way in which we generate and use energy. The Living Planet Report indicates that our reliance on fossil fuels to meet our energy needs continues to grow and that climate-changing emissions now make up 48 per cent - almost half - of our global footprint.

We also know from this report that the challenge of reducing our footprint goes to the very heart of our current models for economic development. Comparing the Ecological Footprint with a recognized measure of human development, the United Nations Human Development Index, the report clearly shows that what we currently accept as “high development’’ is a long way away from the world’s stated aim of sustainable development. As countries improve the wellbeing of their people, they are bypassing the goal of sustainability and going into what we call “overshoot” - using far more resources than the planet can sustain. It is inevitable that this path will limit the abilities of poor countries to develop and of rich countries to maintain prosperity.

It is time to make some vital choices. Change that improves living standards while reducing our impact on the natural world will not be easy. But we must recognize that choices we make now will shape our opportunities far into the future. The cities, power plants, and homes we build today will either lock society into damaging over consumption beyond our lifetimes, or begin to propel this and future generations towards sustainable living.

The good news is that this can be done. We already have technologies that can lighten our footprint, including many that can significantly reduce climate-threatening carbon dioxide emissions. And some are getting started. WWF is working with leading companies that are taking action to reduce the footprint - cutting carbon emissions, and promoting sustainability in other sectors, from fisheries to forests. We are also working with governments who are striving to stem biodiversity loss by protecting vital habitats on an unprecedented scale.

But we must all do more. The message of the Living Planet Report 2006 is that we are living beyond our means, and that the choices each of us makes today will shape the possibilities for the generations which follow us.

James P. Leape, Director General of WWF International

Living Planet Index
The index tracks the populations of 1,313 vertebrate species - fish, amphibians, reptiles, birds, and mammals from all around the world. Separate indices are produced for terrestrial, marine, and freshwater species, and the three trends are then averaged to create an aggregated index. Although vertebrates represent only a fraction of known species, it is assumed that trends in their populations are typical of biodiversity overall.

By tracking wild species, the Living Planet Index is also monitoring the health of ecosystems. Between 1970 and 2003, the index fell by about 30%. This global trend suggests that we are degrading natural ecosystems at a rate unprecedented in human history.

Human Ecological Footprint
Biodiversity suffers when the planet’s biocapacity cannot keep pace with human consumption and waste generation. The Ecological Footprint tracks this in terms of the area of biologically productive land and water needed to provide ecological resources and services - food, fibre, and timber, land on which to build, and land to absorb carbon dioxide (CO2) released by burning fossil fuels. The Earth’s biocapacity is the amount of biologically productive area - cropland, pasture, forest, and fisheries - that is available to meet humanity’s needs.

Since the late 1980s, we have been in overshoot - the Ecological Footprint has exceeded the Earth’s biocapacity - as of 2003 by about 25%. Effectively, the Earth’s regenerative capacity can no longer keep up with demand - people are turning resources into waste faster than nature can turn waste back into resources.

Humanity is no longer living off nature’s interest, but drawing down its capital. This growing pressure on ecosystems is causing habitat destruction or degradation and permanent loss of productivity, threatening both biodiversity and human well-being.

© 2006 WWF - the environmental conservation organisation . Some rights reserved.

» Source: Peak Oil Statistics

Confessions of a Statistician
Article by Dr. Sohbet Karbuz, the former head of Non-OECD Energy Statistics Section of the International Energy Agency. Karbuz’s document examines the accuracy of oil statistics and the reliability of oil market forecasts.

EIA International Energy Data and Analysis
The Energy Information Administration’s official and comprehensive energy statistics from the US Government. Includes the Annual Energy Outlook 2006 with Projections to 2030.

Enerdata Yearbook
You have to purchase updated data, but their sample of statistical oil supply/demand for 2004 looks comprehensive (pdf files). Includes data about production, imports, exports and consumption. Also includes info about the production of oil products.

Fossil Energy and US Petroleum Reserves (DOE)
Some detailed (and updated) chart information about U.S. strategic oil reserves.

Oil Information Data Service
Several difficult to understand databases that list oil supply and demand statistics for OECD countries (including some non-OECD nations). Statistical information on this site is updated yearly in the month of August.

Oil Reserves - Wikipedia
As always, the Wikipedia is one of the most detailed resources for complete information and links to related websites.

Statistical Review of World Energy 2006
A BP Global website with some great statistical data in pdf format. BP has statistics data on oil production, natural gas production, and coal consumption. They also have some interesting tools such as the energy charting tool and conversion calculator.

The Oil Reserve Fallacy
Website that states “Proven reserves are not a measure of future supply”. They have some interesting comparson charts which examine oil supply estimates from four different sources.

WorldOil Industry Statistics
A simple U.S. based listing of statistical charts and forecast research articles, including a monthly chart of US Gas Prices and Trends.

It is quite apparent from this list of top statistics sources that oil supply and production statistics are hard to find and/or understand. This page will be updated as new information resources are found. If you know of any great statistical resources, please send us an email so we can add it to this page (email at bottom of site). You may also leave relevant and useful comments below.

» Source: ASPO USA (Fall 2006)

Who Should Attend

• Leaders and decision-makers from all sectors;
• Individuals and organizations with investments on the line;
• Individuals and organizations who work in the energy sector;
• Transportation and land planners at all levels and in all sectors;
• Concerned citizens wanting information to help them make a difference.

Purpose

Our experts will provide the most current available information about the evolving peak oil and natural gas challenges. To cover those stories, we’re bringing in widely respected speakers from all over the U.S. and Canada plus Europe, the Middle East and even South America. From world-wide industry analyst PFC Energy to a Brazilian cane-to-ethanol grower, you’ll hear a broad range of perspectives.

ASPO USA has partnered with Boston University researchers to explore the critical role that net-energy analysis should play in our policy decisions going forward. In our present mad dash to develop substitute fuels, are we on the right track? Do we have the right scorecard? Attendees will hear first-hand the early results of that partnership and its critical implication for evaluating our options.

At the same time that we continue to address key gaps in essential information and awareness about the looming peak oil issue, it is time to expand our individual and collective focus towards “intelligent responses” to the challenge. What should the Blueprint for Peak Oil Action be? Given what we know today, what best strategies should we as individuals, organizations and a nation pursue from 2007 forward? Every speaker will be engaged in this discussion; and all conference attendees will be asked for their input as well.

» Source: USA Today

“Lower prices are encouraging people to get back out there and drive,” says Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas. Good weather in much of the USA in September and increased security measures at airports, which turned some people off on flying, also likely encouraged travelers to get behind the wheel, Brown says.

In one of the largest one-month changes on record, the nationwide average gasoline price fell 47 cents, or 17%, in September, according to motorist club AAA and the Oil Price Information Service.

The U.S. average for a gallon of regular Wednesday was $2.219, down 27% from this year’s peak of $3.04 a gallon on Aug. 10 and off 52 cents from a year ago. The lowest average price Wednesday was in Missouri, where it was $2.02 a gallon; the highest was in Hawaii, where the average was $2.98.

While the higher prices this year didn’t actually reduce gasoline consumption in most months, it led to slower-than-normal increases in demand. The historical average is for gains of 1.5% to 2%, API’s Planting says.

Population growth, a healthy economy and lower gasoline prices will likely continue to boost gasoline demand going forward, says Kevin Lindemer, head of the energy group at economic consulting firm Global Insight.

“The underlying forces that create gasoline demand are still there,” he says.

But increased demand will keep propping up prices, warns Alliance to Save Energy President Kateri Callahan, who calls the decline in gas prices “not all good news,” because it makes it harder to persuade people to conserve.

“People have a false sense of security that (gasoline prices) are going to stay low and go lower,” Callahan says.

Swati Gunale of Indianapolis has been planning for months to drive to Arkansas this weekend for a volunteer vacation, where she will be helping to build a hiking trail along the Buffalo National River.

Although the 33-year-old would have taken the trip even with gas prices high, the decline in costs at the pump will make her vacation less costly.

“It’s an added bonus for me,” she says.

» Source: LA Times

The first step toward curing an addiction is to admit its existence. So it was encouraging when President Bush admitted in January that “America is addicted to oil.” But America hasn’t been good about going to recovery meetings - which makes it harder for the U.S. to get the world’s other oil addicts to go too.

For China, India, Japan and every other industrial nation, a steady supply of oil is essential to economic growth. And as competition for oil increases, so does the temptation to make it the focus of foreign policy. Bush has warned against the hazards of this approach, and U.S. history - especially in the Middle East - is a catalog of its dangers. But he’d be more convincing, to Americans and other world leaders, if his policy more closely matched his rhetoric.

Now other nations are beginning to do as the U.S. does, not as it says. China has an $8-billion investment in Sudan’s oil sector, for example, which helps explain why it turns a blind eye while the thugs who run Sudan ravage Darfur. The argument used to be that as China’s economy became more integrated with the world’s, it would become a more responsible player in world affairs. This was half right. For the most part, ideology has given way to pragmatism in Chinese foreign policy. Beijing tries to avoid conflict with its biggest trading partner, the United States.

But this same pragmatism also leads China to pursue other policy goals at odds with the U.S. China professes to be genuinely worried about nuclear proliferation, for instance, yet U.S. diplomats have made no headway in persuading Beijing to back U.N. sanctions against Tehran. Perhaps not coincidentally, China imports 11.5% of its oil from Iran and is considering investing at least $70 billion to get more.

And it’s not just China competing for oil. Energy-poor Japan is highly dependent on Middle East oil and so was cool toward Israel for decades (relations are better now, but still low-key). India, meanwhile, with 17% of the world’s population and just 0.8% of known oil and gas reserves, is also racing to secure supplies. It hosted Venezuelan President (and Bush nemesis) Hugo Chavez last year and signed an oil deal with Venezuela. South Korea gets a third of its oil from Saudi Arabia and is trying to hedge its bets by investing in fields from Venezuela to Vietnam.

The rise of Asian powers - and their pursuit of policies designed to secure a steady supply of oil - is a geopolitical watershed, albeit a predictable one. Even if the U.S. were to reduce its oil dependency, its ability to act multilaterally could be constrained by the energy arrangements of other nations.

For these and other reasons, the development of alternative energy technologies that can reduce demand at home and be exported abroad is both an economic necessity and a national security priority. It’s far too important to be left to the environmentalists - or the states, the lobbyists (for nuclear power or ethanol) or even to philanthropists such as Richard Branson. In our globalized economies, lasting peace is unlikely without energy security.

» Source: Energy Tribune

Disaster struck “Peak Oil” cheerleaders this month as Chevron announced the discovery of massive new oil reserves in the deep water of the Gulf of Mexico. “Dang it!” one expert was overheard shouting while being shepherded from MSNBC’s greenroom. “We’ve been predicting the end of oil for a century now, and it finally looked like we were right. Why won’t people just give up looking for a better future so we can all feel prophetic and important for once?”

Okay, I made up that part about MSNBC. Peak oil naysayers would never admit they were wrong or admit that the Chevron discovery is a major blow to their theory. To an optimist, the glass is half full. To a pessimist, the glass is half empty. To a peak oil theorist, the glass is hidden in the next room, but he’s sure it’s damn near empty.

Together, these twin problems - the reluctance of humans to passively accept doom and the fact that we never quite know what we don’t know - are the bane of predicting peak oil production. Which doesn’t mean that oil will never peak - it will. It just means that we won’t know that the peak has occurred until well after it has passed, and (due to pesky human ingenuity) we may not even notice it that much when it does actually peak. We’ll be too busy exploiting some new advance in energy. Dang.

For some reason - perhaps because it is so vital to modernity - the energy industry attracts more than its share of prophets of doom. As I’ve written before on these fine glossy pages, which are more than worth the subscription price, the idea that one actually lives at the end of days is very satisfying, egotistically. I mean, I’m significant - so big things will happen while I’m here, right?

But even if oil were to peak on cue (eventually someone will successfully predict it just through persistence alone), why do so many believe that economic disaster will follow? I’m sure whale oil supplies have long since peaked, despite the deep water exploration efforts of Captain Ahab, yet we do not live in the dark for lack of rendered blubber to fuel our lamps.

Alternatives were found and the truly critical supply - of energy, not whale oil - has risen meteorically since the barely noticed peak in whale oil of the 1800s.

That is how it will likely be with crude oil. The supply will be extended as long as possible, and then gradually replaced by another fuel. Mankind did not get this far by sticking to nuts and berries, or grass, or wood, or coal, or any other single energy source - however vital it seemed in its peak age. Predictions of doom surrounding the eventual peak of oil ignore this history. The passive, withering world envisioned by some peak oil prophets simply doesn’t exist.

As a matter of fact, the aura of doom that eternally surrounds energy reminds me of nothing so much as the absolutely atrocious 1979 film, “Quintet.” This movie was bad - so bad that the memory of it has lurked suppressed in my mind for 20 years, waiting to be awakened by current events. I was pretty sure that, like most bad movies, it starred Michael Caine, but looking it up I was surprised that it was actually Paul Newman. That is how bad it was. My mind had systematically imagined Michael Caine into every scene in an effort to spare Paul Newman.

In this gauze-filtered disaster, matched only by Kevin Costner’s “Waterworld” (which may have starred Michael Caine), the future is a huge Ice Age - that being the climate change people fretted about most in 1979. And in this glacial future, people just scurry around living off the residual firewood, food, and fashion of the pre-Ice Age world - wasting away, betting their declining resources in a stupid suicide game (a nice metaphor for the zero-sum conception of markets), and in general not being very creative or industrious at all. They just wait to freeze to death when the fuel runs out. And that is why the movie is so bad. People just don’t act like that.

Chronic predictions of disaster surrounding declining energy supplies are the economic equivalent of “Quintet” - unrealistic fantasy, divorced from the dynamism of human nature. And like “Quintet,” they are best forgotten - or at least blamed on Michael Caine.

» Source: Science Daily

The Larsen ice shelf at the northern end of the Antarctic Peninsula experienced a dramatic collapse between January 31 and March 7, 2002. First, melt ponds appeared on the ice shelf during these summer months (seen in blue on the shelf), then a minor collapse of about 800 square kilometers occurred. Finally, a 2600 square kilometer collapse took place, leaving thousands of sliver icebergs and berg fragments where the shelf formerly lay. Brownish streaks within the floating chunks mark areas where rocks and morainal debris are exposed from the former underside and interior of the shelf.

Global warming and the ozone hole have changed Antarctic weather patterns such that strengthened westerly winds force warm air eastward over the natural barrier created by the Antarctic Peninsula’s 2 km-high mountain chain. On days when this happens in summer temperatures in the north-east Peninsula warm by around 5 degrees C, creating the conditions that allowed the drainage of melt-water into crevasses on the Larsen Ice Shelf, a key process that led to its break-up in 2002.

Lead author Dr Gareth Marshall from the British Antarctic Survey said, “This is the first time that anyone has been able to demonstrate a physical process directly linking the break-up of the Larsen Ice Shelf to human activity. Climate change does not impact our planet evenly - it changes weather patterns in a complex way that takes detailed research and computer modelling techniques to unravel. What we’ve observed at one of the planet’s more remote regions is a regional amplifying mechanism that led to the dramatic climate change we see over the Antarctic Peninsula.”

Reference: Marshall GJ, Orr A, van Lipzig NPM, King JC. 2006. The impact of a changing Southern Hemisphere Annular Mode on Antarctic Peninsula summer temperatures. Journal of Climate 19: 5388*5404.

The collapse of the 3250 km2 Larsen B Ice Shelf took place in 2002. During the past 40 years the average summer temperatures in this region of the north-east Peninsula has been 2.2°C. The western Antarctic Peninsula has showed the biggest increase in temperatures (primarily in winter) observed anywhere on Earth over the past half-century.

Ice sheet - is the huge mass of ice, up to 4 km thick, that covers Antarctica’s bedrock. It flows from the centre of the continent towards the coast where it feeds ice shelves.

Ice shelf - is the floating extension of the grounded ice sheet. It is composed of freshwater ice that originally fell as snow, either in situ or inland and brought to the ice shelf by glaciers. As they are already floating any disintegration (like Larsen B) will have no impact on sea level. Sea level will rise only if the ice held back by the ice shelf flows more quickly into the sea.

Loss of ice shelves near the Antarctic Peninsula is one of the most obvious signs of climate change. Elsewhere in Antarctica ice shelves are shrinking, which most scientists believe is because of a recent increase in the rate at which the ocean melts the ice.

British Antarctic Survey is a world leader in research into global issues in an Antarctic context. It is the UK’s national operator and is a component of the Natural Environment Research Council. It has an annual budget of around £40 million, runs nine research programmes and operates five research stations, two Royal Research Ships and five aircraft in and around Antarctica. More information about the work of the Survey can be found on our website: http://www.antarctica.ac.uk

» Source: Black Hills (Video)

Peak Oil is the simplest label for the problem of energy resource depletion, or more specifically, the peak in global oil production. Oil is a finite, non-renewable resource, one that has powered phenomenal economic and population growth over the last century and a half. The rate of oil ‘production,’ meaning extraction and refining (currently about 84 million barrels/day), has grown in most years over the last century, but once we go through the halfway point of all reserves, production becomes ever more likely to decline, hence ‘peak’. Peak Oil means not ‘running out of oil’, but ‘running out of cheap oil’. For societies leveraged on ever increasing amounts of cheap oil, the consequences may be dire. Without significant successful cultural reform, economic and social decline seems inevitable.

Why does oil peak?

Oil companies have, extracted the easier-to-reach, cheap oil first. The oil pumped first was on land, near the surface, under pressure, light and ’sweet’ (meaning low sulfur content) and therefore easy to refine into gasoline. The remaining oil, sometimes off shore, far from markets, in smaller fields, or of lesser quality, takes ever more money and energy to extract and refine. Under these conditions, the rate of extraction inevitably drops. Furthermore, all oil fields eventually reach a point where they become economically, and energetically, no longer viable. If it takes the energy of a barrel of oil to extract a barrel of oil, then further extraction is pointless.

Who came up with the idea of Peak Oil?
M. King Hubbert

In the 1950s a U.S. geologist working for Shell, M. King Hubbert, noticed that oil discoveries graphed over time, tended to follow a bell shape curve. He posited that the rate of oil production would follow a similar curve, now known as the Hubbert Curve (see figure). In 1956 Hubbert predicted that production from the US lower 48 states would peak between 1965 and 1970. Shell tried to pressure Hubbert into not making his projections public, but the notoriously stubborn Hubbert went ahead and released them. In anycase, most people inside and outside the industry quickly dismissed Hubbert’s predictions. In 1970 US oil producers had never produced as much, and Hubbert’s predictions were a fading memory. But Hubbert was right, US continental oil production did peak in 1970, although it was not widely recognized for several years, and only with the benefit of hindsight.

No oil producing region fits the bell shaped curve exactly because production is dependent on various geological, economic and political factors, but the Hubbert Curve remains a powerful predictive tool.

Although it passed by largely unnoticed, the U.S. oil peak was arguably the most significant geopolitical event of the mid to late 20th Century, creating the conditions for the energy crises of the 1970s, leading to far greater U.S. strategic emphasis on controling foreign sources of oil, and spelling the begining of the end of the status of the U.S as the world’s major creditor nation. The U.S. of course was able to import oil from elsewhere, and life continued there with only minimal interuption. When global oil production peaks however, the implications will be far greater.

So when will oil peak globally?

Hubbert went on to predict a global oil peak between 1995 and 2000. He may have been close to the mark except that the oil shocks of the 1970s slowed our use of oil. As the following figure shows, global oil discovery peaked in the late 1960s. Since the mid-1980s, oil companies have been finding less oil than we have been consuming.

» Source: Whiskey and Gunpowder

What will the world look like on the backside of Hubbert’s Peak? What you see depends upon where you stand. If you happen to stand in the Pentagon, the headquarters of the U.S. Department of Defense, the view is rather sobering. Well, what I mean to say is that if the view is not rather sobering, then whoever is doing the looking had better get their eyes checked.

The U.S. government, as a whole, consumes not quite 2% of all the liquid fuel that the entire U.S. economy uses in a given year. That translates into about 440,000 barrels of oil per day, or slightly more than the entire output of the oil field at Prudhoe Bay, when the pipelines are not shut down due to corrosion. Multiply by 365 days per year, and the U.S. government burns up about 160 million barrels of oil per year, at a cost of something over $10 billion at recent price levels.

Of the total U.S. government liquid fuel use, about 97% of that is consumed by the Department of Defense, making that agency the world’s single largest fuel-burning entity. But even within the U.S. DOD, the respective services are themselves gargantuan users of liquid fuel. According to data supplied by the Defense Energy Support Center, the interservice breakdown for fuel use is as follows:

• Department of the Air Force: 53%
• Department of the Navy (including Marine Corps): 32%
• Department of the Army: 12%

In recent testimony before the U.S. Congress, a DOD representative stated that “mobility” type fuel, used in aircraft, ships, and vehicles, accounts for almost 75% of total DOD energy consumption. Thus fuel used to heat and power buildings and facilities accounts for about 25% of DOD energy usage. In terms of fuel types, jet fuel accounts for 58% of mobility fuel. (Jet fuel is used in aircraft and nonaircraft platforms, such as tanks, other ground vehicles, and power generators.) The balance of energy usage comes from marine diesel, electricity, fuel oil, gasoline, and other sources, such as nuclear, wind, and solar. Yes, the DOD is one of the largest single generators and users of renewable power in the U.S.

Walk the Line

Any way you look at it, the Air Force, Army, and the Navy and Marine Corps just plain use a lot of gas, or I should call it “mobility fuel.” You certainly know it when you see it, especially if you have ever walked the line along just about any U.S. military installation and taken a glance at the equipment. The Air Force is all about airlift and platforms that can deliver strike packages from the air. The Navy and Marine Corps are all about sealift and sea-delivered strike packages. And the Army is all about maneuvering and fighting, seizing and holding. And this is merely a bare-bones simplification of the respective service missions, which are quite broad, complex, and very much interrelated.

But the point on which I want to focus in this discussion is that the availability of liquid fuel is one of the fundamental assumptions at all levels of U.S. military activities. From the tactical level of fighting to the operational level of war, and from operations to the highest levels of strategic thinking, “burning gas” (whoops, I mean “mobility fuel”) is built into all U.S. doctrine. Energy, and in particular energy derived from liquid fuel, is at the heart and soul of the U.S. military power.

The Navy, for Example…

For example, let me illustrate this point. Let’s take a look at one service, the U.S. Navy, and its concept of operations. A recent and authoritative publication entitled Naval Operations Concept 2006, co-signed by both the chief of naval operations and the commandant of the Marine Corps, listed what it called “Strategic Missions” and “Naval Missions” of the Navy and Marine Corps. The Strategic Missions are:

• Homeland defense
• War on terror and irregular warfare
• Conventional campaigns
• Deterrence
• Shaping and stability operations.

Each of these “strategic” missions could be the subject of many articles, if not many volumes. I have not the space in this article to describe the details of each mission, but I hope that you can see how each mission involves a vast scope of complex operations in order to carry it out. All of these missions require trained personnel and suitable equipment, such as ships, aircraft, ground vehicles, and other devices that are bolted to the floors of fixed installation or which orbit the Earth and look down from on high. And all of this equipment requires energy in order to move it into position and make it all work.

Subordinate to the Strategic Missions, but embodied within them from the standpoint of operations, are a series of what are called Naval Missions. These are, according to the recent Naval Operations Concept 2006 publication:

• Forward naval presence
• Crisis response
• Expeditionary power projection
• Maritime security operations
• Sea control
• Deterrence
• Security cooperation
• Civil-military operations
• Counterinsurgency
• Counterterrorism
• Counterproliferation
• Air and missile defense
• Information operations

Again, all of these “naval” missions could be the subject of many articles, if not many volumes. I cannot go into detail here, but each mission requires people and equipment to carry it out. And most surely, each and every mission requires energy sources to power the systems.

Where Are the Aircraft Carriers?

There is a famous saying within the halls of politics and political-military statecraft in and around Washington, D.C. It goes something like this: “When something bad happens in the world, the president of the United States turns to his advisers and asks, ‘Where are the aircraft carriers?’” The president might actually say “aircraft carriers.” But he could just as soon mean, “Where are the submarines?” or “Can I get strategic airlift into that area?” or “Do you have some Marines on a ship nearby?” or “What else can you give me to help shape the events?”

The “bad” thing to which the president refers might be a civil war in equatorial Africa, or a hot war in the Middle East, or a tsunami in Indonesia, or an earthquake in Iran or Pakistan. Whatever it is, the U.S. president has grown accustomed, over the past half century or so, to having the military flexibility to send in large ships, with embarked aircraft and trained combat or medical forces in close proximity, and to do it on a rapid basis. Or Mr. President has the ability to send long-range airlifters into a particular theater, there to disgorge people and equipment that can make a difference in a hurry.

But when you boil it all down and distill this “influencing and shaping” process to its very essence, this entire concept of operations is based on U.S. military equipment burning gas.

Don’t Run Out of Gas

The strange thing is that in the keystone documents that define and control the elements of strategy of the U.S., you hardly ever see a reference to that “mobility fuel” as being the sine qua non of U.S. military power. Look, for example, in the National Security Strategy of the United States. Or look in the National Military Strategy of the United States (PDF). Or try the National Strategy for Maritime Security .

These important publications discuss big-picture operational and strategic issues, but provide essentially no guidance on one very fundamental concept. That is, “Don’t run out of gas.”

Some of That “Logistics” Stuff

Perhaps the point of not running out of gas is so fundamental that it is considered silly even to raise it in such ethereal policy documents. Within the political and military planning process at almost every level, “mobility fuel” is usually relegated to the nether world of “logistics.” That is, if our guys need fuel to drive their ships or airplanes, then the logistics people will get it and deliver it to where it is needed. After all, that is why we have logistics people, right?

One well-known comment on the subject came from U.S. Navy Adm. Ernest J. King (no relation to me, by the way). At one point during the Second World War, Adm. King said, “I do not know what the hell this ‘Logistics’ stuff is that everyone is talking about, but I want some of it.” Of course, Adm. King was just kidding around when he said that. Every military planner knows that supplies will make or break a campaign. “Modern” logistics had its start with the campaigns of Wallenstein in the 17th century. In the early 1800s, no less an authority than Napoleon said, “An army travels on its stomach.” Today, a modern army travels only as far as its supply lines will carry it. Run out of supplies, and you may as well be in Stalingrad or Dien Bien Phu, if not part of an encircled Egyptian army on the Sinai Peninsula.

Which brings us back to the concept of Hubbert’s Peak, or the “peak” in the volume of conventional oil that can be extracted on a daily basis from the crust of the Earth. U.S. military power, in all its forms, is distinctly a creation of a world in which large quantities of conventional oil were available, and relatively affordable. The U.S. military machine is built on and around cheap and available “mobility fuel,” and virtually its entire body of doctrine is founded on pre-Peak Oil thinking. If the world is at or fast approaching a state of Peak Oil, where does that leave us?

“Who Is in Charge?”

In a three-paragraph memo dated Dec. 14, 2005, Defense Secretary Donald Rumsfeld noted to his deputy, Gordon England, that the DOD “should be doing all it can” to save energy. Rumsfeld then went on to ask whether the DOD was doing enough, asking: “Who in the department is in charge?”

Memo to Mr. Rumsfeld: “Sir, no one is really in charge.”

Nobody is in charge? That is not quite what they teach at the Harvard Business School. But perhaps a better way to look at it is that there is no single point within the DOD at which all wiring diagrams end, except for maybe one office currently occupied by a certain Donald Rumsfeld. So aside from the occupant of the Office of the Secretary of Defense, there is no one person to blame if things go wrong. Not, of course, that things ever go wrong in the field of energy supply, right? (Just kidding.)

The good news is, I believe, that there are actually a lot of people within the DOD who are doing different things about energy, but no one person or office monitors or controls things. Yes, it sounds counterintuitive, but maybe we should call it a “market” approach to solving energy problems. From the most advanced research and development laboratories to the troops in the field, people within the DOD are thinking about energy issues. And there is some very good thinking going on.

Out in the Fleet and Field

The Marine Corps commanding general in Anbar Province, Iraq, has recently placed a top-priority request for renewable energy systems to power fixed bases and installations in his area of responsibility. Currently, U.S. military operations in Anbar are dependent on long logistics lines, stretching back into Kuwait, over which large volumes of fuel must be hauled just to do such a mundane thing as power generators that keep the lights on and run the computers. The drivers, trucks, and, of course, the fuel, are all subject to attack along the lines of travel. The Marine Corps general wants to reduce the requirement for liquid fuel supplies, and has requested systems that are based on photovoltaic power generation, supplemented by easily installed wind systems, coupled to battery storage cells. These systems are in production, have already been deployed elsewhere in the world, and are available. This is one form of post-Peak Oil military thinking.

The U.S. Army is redesigning the ubiquitous Humvee. One of the key complaints about this versatile battlefield vehicle is that it consumes too much fuel. The Humvee has become an icon of the military services over the past two decades, since it replaced the World War II-era Jeep. But the Humvee gets as few as 4 miles per gallon in city driving and a paltry 8 miles per gallon on the highway. The Army wants to see a Humvee replacement that weighs 30-40% less and that uses proportionately less fuel.

The U.S. Air Force is qualifying new types of fuel derived from both natural gas and coal. On Sept, 19, 2006, a B-52 bomber actually flew with one engine mount using a newly produced liquid fuel derived entirely from natural gas. Due to the nature of the manufacturing process, the fuel contains virtually no sulfur and hardly any heavy metals, as opposed to jet fuel derived from refined petroleum. In ground-based testing, the engines that burned this new type of fuel did not experience any measurable loss of performance and required less maintenance. Another virtue of this synthetic fuel is that it has a storage life that is orders of magnitude longer than petroleum-derived fuels.

The U.S. Navy is experimenting with ship designs and construction techniques that are orders of magnitude more efficient than in years past. Naval architects and ship designers are working to build performance into ship systems, anticipating future oil costs in the range of $200 per barrel. Some novel ideas envision certain future classes of Navy ships using masts and sails, with the sails and the exterior of the hulls coated with photovoltaic cells. All of this is with the goal of reducing the requirement for liquid “mobility fuel.”

Ashore, both the Navy and the Air Force are among the largest generators and consumers of “green energy“, almost all of it derived from windmills. And all of this has been happening with no one really, as the expression goes, “in charge.”

“More Than Anyone Else”

There is an old criticism of the military, along the lines that “the generals always plan to fight the last war.” In my view, however, I think that it depends on the general, and it depends on the war. One could just as easily say that it is the bulk of politicians, the mainstream media, and the large body of the people who are the ones fixated on fighting that “last war.” Don’t be so hard on the people who are tasked with doing the hard work of making the U.S. national defense system work. It is actually quite a difficult job.

According to U.S. Rep. Roscoe G. Bartlett, a Republican member of Congress from Western Maryland, the U.S. military is “doing more than anyone else - in the government or around the country” to address a future in which energy supplies will be scarce and expensive. Rep. Bartlett adds, “I don’t think the country as a whole has any perception of the danger” of America’s reliance on foreign oil.

As I wrote at the beginning of this article, what you see depends on where you stand. For all of its vast size and energy usage, some of the most pioneering work in addressing the issue of Peak Oil is presently being conducted within the DOD. It is too much to say that we are witness to “Hubbert’s Defense Department.” But the resources of the DOD are vast, and this department of the U.S. government appears to be getting the message.

The question for the DOD is the same as the question for the U.S. broadly, and for the developed world generally. How fast can we adapt to a post-Peak Oil future? Can we change consumption habits faster than depletion leads to the declining availability of conventional oil? As I have said in other articles in Whiskey and Gunpowder, this is a race against time.

Until we meet again…
Byron W. King

» Source: The Guardian Unlimited

The other day I found myself on the M25. In, of course, a traffic jam. There was a traffic queue on the other side of the motorway too, pointing in the other direction and not really going anywhere either. I had a sudden insight at that moment: in 50 years’ time, this scene - of fossil fuel-driven cars and trucks stuck stationary on this motorway - won’t happen. There won’t be that many vehicles with that fuel.

Don’t believe me? It’s not because the oil is going to run out, but because we’ll pass the point where we’re finding more than we’re using. Which will mean that we’re burning diminishing reserves.

The US government’s Energy Information Agency last year forecast that world demand for oil will grow by 54% in the first 25 years of this century; to meet that, by 2025 oil-producing countries will have to supply 44 million barrels of oil extra every day. (The world used 82m barrels per day in the first quarter of last year.)

But there is only a finite number of dinosaurs and other creatures from millions of years ago to be crushed into coal and oil. The International Energy Agency, which collects data from oil products, expects peak oil production somewhere between 2013 and 2037, after which production will fall by 3% annually.

Which adds up to very expensive barrels of oil 50 years from now, given that we’ll be scrapping with China and India and the US for oil supplies. Look at the price of oil today: at 80p per litre, if your car manages 30 miles per (imperial) gallon - which it won’t in a traffic jam, but be generous - then you’re spending 12 pence per mile, and that’s ignoring the cost of insurance and road tax and repairs. That’s a lot. So there’ll either be fewer cars, or they’ll be powered differently.

Now, knowing human nature, one has to feel that people are going to be very reluctant to let go of their cars. Public transport is a wonderful idea, spoilt only by the fact that humans are irredeemably selfish: we’re delighted for other people to take public transport so the roads are clearer for us.

So, we have a scenario where fossil fuels are much more expensive and electric cars are commonplace rather than remarkable. That suggests shorter journeys (since battery technology has tried and tried for years, but won’t get pushed to the limits until one can only use electric) and the price of electricity begins to matter too. By then, some government will have had to bite the bullet about where our power should come from.

A combination of pragmatism and politics suggests that nuclear power is going to be important 50 years hence. Pragmatic, because as Brian Cox, a research fellow at the University of Manchester, pointed out on the Guardian Science podcast a few weeks ago, energy conservation just won’t close the gap; nuclear power is the only way to give us greedy people enough power to run our cars, computers, lights, ovens and so on.

And it’s interesting to find that most other scientists take the same view. It’s political, because one doesn’t really want to rely on Russia for our gas supply decades hence. I’m not expecting nuclear-powered cars. But it’s clear that things can’t go on like this. And what will get us out of the jam we’re in?

Technology, obviously. We know how to make nuclear power stations; we know how to make effective batteries; we know how to make a world where we don’t measure our journeys by the distance between petrol stations, but between power points. The question is, will we have the will to do it, or will everyone just keep chugging along behind each other?

The other realisation that struck me that day was that changing the way that we think about cars and fuel isn’t like - as that cliché goes - turning around a supertanker, because a supertanker has a single captain in charge who directs the course.

Instead, there are millions of us making little choices about whether we buy an electric car or a fossil-fuelled one. It’s a supertanker made up of millions of little boats. And they’re all following the boat in front. Trouble is, we’re all going in a circle. When, precisely, will we change course?

» Source: Daily Reckoning

Against the background of everything else happening in the financial markets is the apparent circumstance of peak oil. Even The New York Times joined the chorus in a Sunday editorial, saying:

“Our demand for petroleum products strains the limits of the global capacity to supply them. In past decades, if a pipeline broke in Nigeria, Saudi Arabia might compensate by setting workers to pumping more oil. Now, with little additional capacity, rising prices are necessary to balance out supply and demand.”

No more increasing capacity = peak oil.

Peak oil and tradable paper currencies: “Rearview mirror” action

It’s as simple as that. We now have nine and a half months of “rearview mirror” action to look back and see that world oil production has retreated from its all-time high of just over 85 million barrels a day (m/b/d) achieved in December 2005 (just as geologist Kenneth Deffeyes of Princeton had predicted). For 2006, production has remained in the 84 m/b/d range every month reported so far, while demand has exceeded that.

Texas oil man Jeffrey Brown, a commentator at TheOilDrum.com, the outstanding oil discussion group on the Internet, makes the point that Saudi Arabia is at the same point statistically (in terms of ultimate recoverable reserves) that Texas was at in 1972 when production there peaked. The world’s four greatest oil fields are in depletion (Burgan [Kuwait], Daqing [China], Cantarell [Mexico], and Ghawar [Saudi Arabia]) and these have accounted for over 14 percent of the world’s oil production. (Ghawar alone accounts for over 60 percent of Saudi Arabia’s production.) The North Sea has peaked and production there is “crashing.”

Venezuela has peaked and its oil is low-quality heavy crude. Indonesia (an OPEC member) has peaked and is now a net oil importer. Nigeria’s political chaos is making production increasingly difficult-to-impossible. Production in the Canadian tar sands is not making up for losses elsewhere. The United States alone is down to about a four-year supply of conventional crude and condensates while importing 70 percent of the oil consumed. Discovery of new oil (including Chevron’s largely hypothetical deepwater “Jack” finds) is barely covering a fraction of the world’s consumption. So it goes….

Peak oil and tradable paper currencies: An end to industrial expansion

Where finance is concerned, the basic implication of peak oil is pretty stark: an end to industrial expansion (i.e. “growth”). All the alternatives to oil will not keep the industrial economies expanding - they can only slow down a contraction, and only marginally so. The trouble with this picture is that finance is a system that uses paper markers to represent the hope and expectation for the expansion of wealth. These markers are currencies, stocks, bonds, option contracts, derivatives plays, and other certificates that are traded in open markets. If there is no longer any hope of increased wealth in the world, then all those tradable paper markers become losers. Their value unwinds and imagined piles of wealth evaporate into thin air.

The unwinding process depends on the psychology of the people who own these certificates. If they do not understand the global oil situation and its implications, then they will continue to hope for and expect expanded wealth, and thus continue to regard their paper certificates as credible markers of value. And that is largely the case at the moment, since most of the playas in the financial markets are not paying attention to the peak oil story, or don’t believe it is for real.

Two special and transient circumstances are now propping up the financial markets. One is that for practical purposes the world is virtually at peak, meaning this is an extra-special time of strange behaviour (like the point in the apogee of a steep sub orbital flight in which passengers become momentarily weightless). Supply and demand for oil are only beginning to go out of whack (that is, demand just barely exceeding supply). Even at this early stage, the oil markets themselves are showing stress, as hoarding behaviour sets in and induces wider swings of price volatility. But these swings in oil prices - such as the one we’re in right now, where prices have crashed 20 percent since the panic buying (hoarding) of June and July - send false signals to the financial players.

The main false signal is that all is well on the global oil scene… there’s no real supply problem… and hence no threat to the continuing expansion of industrial production and its associated wealth-generating activities. This signal just tells the playas to buy more paper markers. Thus, the stock market goes up.

The second special and transient circumstance is that so much wealth has already accumulated along the way to peak, that financial markets take on a life of their own - as existing wealth “invests” itself in more paper markers hoping and expecting to “grow” into even more wealth. The problem here is that existing wealth is actually being squandered, since the paper markers will only lose value as the hopes and expectations vested in them dissolve in disappointment. But we haven’t quite reached that point yet.

» Source: Bernama.com

Every day, the world consumes about 230 million barrels of energy (expressed in terms of “oil equivalent” or MBDOE, with demand split about equally between developed and developing nations.

ExxonMobil also says that with energy critical to economic progress, the global economy is expected to double in size by 2030 — mainly driven by developing nations which now account for 20 per cent of world economic output.

“By 2030, this share will grow to 30 per cent, led by rapidly expanding economies such as China, India, Indonesia and Malaysia.”

Entitled “Tomorrow’s Energy: A Perspective on Energy Trends, Greenhouse Gas Emissions and Future Energy Options, the booklet contains a long-range outlook of global energy trends and provides a strategic framework to aid evaluation of potential business opportunities.

“Continued rapid improvement in energy efficiency, mainly driven by the development and use of new technology in the transportation and power generation sectors, is expected to temper the growth in global energy demand,” it says.

Providing a scenario on energy needs in the future, ExxonMobil predicts that fossil fuels will remain predominant energy sources, with oil and gas to represent close to 60 per cent of the overall energy in 2030, a similar share today.

Oil use is expected to grow at 1.4 per cent annually but significant improvements in vehicle fuel economy would dampen demand growth.

Demand for gas is set to grow at 1.8 per cent annually, led mainly by strong growth in global electricity demand.

Coal, like gas, is expected to grow at 1.8 per cent annually, driven by expanding power generation.

ExxonMobil says that despite higher carbon dioxide intensity, large indigenous supplies will give coal economic advantages in many nations, particularly in Asia.

Turning to non-fossil energy supplies which are also set to expand, it says nuclear energy will grow by an average 1.4 per cent annually with the largest growth in Asia, “although we expect North America and Europe to add new plants late in the outlook period”.

Hydro power will grow at just under two per cent a year, with increases likely in China, India and other developing countries.

As for biomass, its use including traditional fuels (wood dung) used in developing countries and solid waste will grow about 1.3 per cent per year.

Growth of wind and solar energy combined will likely average about 11 per cent annually, supported by subsidies and related mandates.

Even with this rapid projected growth, wind and solar will contribute only one per cent of total energy by the next 25 years or so, illustrating the vast scale of the global energy sector.

Biofuels, including ethanol and biodiesel, will grow from less than one million barrels per day (MBD) last year to about three MBD in 2030.

Don’t be fooled by short-term trends in the price of oil and other energy-related commodities. Don’t be influenced by the talking heads on the evening news or cable television who say that there is a speculative commodities bubble and that the price is set to fall. Although the price of oil will continue to fluctuate widely, the overall trend is clearly up.

» Source: Senior Journal

Recently, Chevron announced a major new oil discovery in the Gulf of Mexico. It was front-page news all across the nation. It was the lead story on the evening news. Reportedly, this discovery will increase America’s oil reserves by 50%! The days of $70 per barrel oil must be coming to an end, right?

Wrong.

If the estimates prove true, the new discovery won’t impact oil imports for at least 5 to 7 years. Moreover, the discovery may not be all it’s cracked up to be. Chevron didn’t discover one big pool of oil that just has to be tapped and pumped out.

The Lower Tertiary basin, where the test well was located is about 80 miles wide, 300 miles long and is 175 miles offshore. Geologists also believe that the oil in this zone will be located in smaller pockets, not in a large pool.

Even as these pockets are discovered, getting at the oil will not be easy. The discovery at the test well known as Jack No. 2 was at a depth of 28,000 feet and in water that was 7,000 feet deep.

The equipment needed to access these deposits is very expensive. If the oil only exists in smaller pockets, it will require more wells, more equipment and more money. By the way, this is also an area of the Gulf of Mexico prone to Category 4 and 5 hurricanes.

The worldwide demand for oil continues to increase far faster than its discovery and production. Many speculate that the slowing US and World economy will reduce the demand and result in lower prices. I disagree for three reasons.

Two reasons that I believe the price of oil will continue to go up are China and India. These are two countries where the majority of the population has lived at third-world standards. This is changing, and quickly.

Supposedly, China is taking steps to throttle its growth. It’s not working. Cities across the nation have begun to taste the prosperity associated with courting multi-national corporations. If anything, they are doing so more aggressively.

The result is that China’s economy grew 11.3 percent in the latest quarter—it’s fastest pace in more than a decade. China is currently the world’s second largest importer of oil. Their oil imports grew 15.6 percent in the first half of 2006. The U.S. economy would have to practically be in a depression to offset that level of growth.

The third reason is that when the demand for something is high and the supplies are limited, the price goes up. Some think that executives at big oil companies like BP and ExxonMobil dictate the price of oil. Those who believe that obviously have no idea how the world economy works. That’s like saying that a farmer in Iowa controls the price of wheat.

Moreover, OPEC isn’t about to let the price of oil decline much further. They announced yesterday the need for ‘oil-price stability’. What they mean is that if the price of oil continues to decline then they will reduce their output.

My clients have been profiting from energy-related investments that pay dividends of 8% or more. They’ve seen their energy holdings increase the overall value of their portfolio while broad diversification has minimized the volatility. It’s not easy, but you can do the same.

This all doesn’t mean that you should over-load your portfolio with energy-related investments. It does mean that their level in your portfolio must be addressed based on your needs, time-frame and ability to accept fluctuations in value. Choose wisely and that 800 lb. gorilla will be your best friend.

» Source: PressZoom

The technology, named the Vortex Flow SX tool, was sponsored by the Stripper Well Consortium, a national industry-driven group focused on developing low-cost technologies applicable to both oil and gas stripper wells. The U.S. Department of Energy ( DOE ) co-funds the consortium through its National Energy Technology Laboratory ( NETL ) in an agreement with The Pennsylvania State University.

Stripper wells produce oil and gas at the low rates of less than 10 barrels per day of oil or 60,000 cubic feet per day of natural gas. Tapping into additional oil and gas supplies within the nation’s stripper wells can be an important contributor to U.S. energy security.

Some 80 percent of U.S. oil wells are now classified as marginal wells. Because these wells produce 860,000 barrels of oil per day ( nearly 20 percent of U.S. production ) and the nation’s natural gas stripper wells produce 1.5 trillion cubic feet of gas per day ( about 8 percent of U.S. production ), any increase in their production rates or decrease in related costs serves as a boon to the nation’s supply of energy.

Vortex Flow LLC developed the new SX tool and, to date, has deployed it in more than 200 stripper well operations across the country, increasing production and decreasing maintenance costs.

Some “real-life” successes of the Vortex technology include the following:

A Pennsylvania well operator installed the tool on numerous gas wells and lowered line pressures to increase gas production by 30 percent.

An operator in New Mexico installed Vortex tools ranging from 4 inches to 12 inches in a well system and similarly lowered line pressures and increased production.

A Colorado pipeline operator installed a 10-inch SX tool and observed drops in pipeline pressures, increases in production, and the cost-saving elimination of a process called “line pigging.”

The installation of an SX tool in a 3,000-foot-deep coalbed gas well resulted in lowering the bottom hole pressure by 15 percent and increasing gas production by 10 percent.

The installation of the SX tool in a 600-foot-deep Powder River coalbed gas well allowed the well to continue to flow uninterrupted for 10 months, thereby saving about $12,000 in annual costs.

What is so inherently special about the Vortex tool that facilitates enhanced production and greater cost effectiveness in stripper wells?

Vortex Flow based its SX tool - tubelike devices with spool connectors inserted into a well - on breakthroughs in fluid dynamics that provide a way for an operator to address the turbulence and disorganization of liquids and gases when they flow through a pipe. The SX tool converts the turbulent, disorganized flow into an organized “vortex” flow that accelerates the velocity of water used in the process and reduces the friction that causes the pressure to drop as fluids move through a pipe. By doing so at both surface and subsurface levels, the SX tool helps to reduce wear and tear on oil and gas pipelines while increasing production and reducing costs. At current gas prices, the SX tool has been shown to pay for itself within 60 days. Vortex Flow perfected its tool during testing at DOE’s Rocky Mountain Oilfield Testing Center in Casper, Wyoming.

NETL researchers have been actively identifying wells that prematurely decline to stripper well status and have been developing technologies that result in increased production, longer well life, and more efficient and cost-effective recovery of remaining oil and gas in those wells.

Since the majority of stripper well owners are small, independent operators, NETL organized the Stripper Well Consortium to leverage the resources of those operators to develop applicable technologies.

» Source: Jerusalem Post

Oil has been discovered in the Dead Sea area, Dr. Eli Tenenbaum, an official from Genco, the national company responsible for drilling in the region, reported on Wednesday. Tenenbaum stated that the amount of oil could reach commercial levels.

“We noticed that the pressure in the area was very high and when we opened the tap, oil started flowing freely for several minutes,” Tenenbaum told Channel 10.

Tenenbaum said that the workers washed their hands with the “black gold” when they made the discovery. “We hope it was the first of many such discoveries,” he added excitedly.

Not far from the drilling site, the crew spotted an oil reserve that Tenenbaum described as “very attractive,” which they believed contained between four and six million barrels, worth an estimated 300 million dollars.

The operation began 10 years ago but was put on hold since it was not deemed economically viable. However, due to the recent soaring oil prices the discovery of new oil sources became necessary.

Genco was drilling at a depth of 2000 meters.

Infrastructure Minister Binyamin Ben Eliezer said it was “just the beginning” and that is was vital to find out whether the oil field was commercially viable or not.

“It is an encouraging sign,” he said. “We are checking the entire area and we are opening the whole region for drilling. We will give our full support to any company that wants to try.”

» Source: Falls Church

Last week they took a poll here in Virginia on how the race for US Senate was shaping up. The poll showed the candidates in a dead heat, but the issues section of the story caught my eye. Twenty-three percent said the most important issue was Iraq, followed by terrorism at 19 percent; the economy, 16 percent; health care, 10 percent; immigration, 9 percent; taxes, 9 percent; moral and family values, 8 percent; and dead last was gasoline prices and energy, 1 percent. So much for voter concern about gasoline prices.

A lot has happened since last winter when President Bush pronounced us addicted to oil and Congress was falling all over itself introducing bills to lower our gas prices and reduce our dependence on the Middle East. What a difference a 60-cent drop in the price of gasoline makes these days.

Unless there is a major disaster in the next few weeks, it is unlikely oil depletion will have much impact on the 2006 mid-term elections. People may have nagging doubts about dependence on foreign oil, but it is doubtful that many candidates are going out on the limb and starting to talk about conservation, sacrifice, life style changes and all that will come with peak oil. It’s too depressing and still a great way to lose an election. This is too bad because even if it turns out that we have the resources to make it through to a post oil-age world and into some semblance of life-as-we-know it, it is going to take 20 or more years of severe economic hardships. The sooner the debate begins, the better.

Since the 2006 election seems like a lost opportunity to debate oil depletion, what about 2008? From the vantage point of 25 months away, there is obviously much about the 2008 political landscape that, as yet, we haven’t a clue. Which party will be controlling which house of Congress? What will the status of US involvement with Iraq and perhaps other Middle Eastern countries be? What will crude be selling for and what will be the price of gasoline? Where will the Dow-Jones be? Will the housing bubble have burst? Will it be obvious or murky that worldwide oil depletion has started or is near at hand?

There are, however, some parameters of 2008 that seem reasonably certain. On the first Tuesday after the first Monday in November we will be electing a new President of the United States. No matter how much oil is currently left in the ground, there will be 62 billion barrels less of it when we get around to voting. We can also be sure that US reliance on foreign oil and products, which is currently about 66 percent of our consumption, will increase a bit as US oil supplies continue to deplete.

The experience of the last year and the lesson of the poll referred to above is that voters will only be moved by high gas prices. All of the logical arguments, trend lines, statistics and speeches in the world won’t persuade a critical mass that there is serious trouble ahead until it is driven home by the sign over the gas pumps.

From a geological standpoint, several of the world’s largest exporters contributing significantly to US oil supplies are suspected of being in or very close to going into depletion. Mexico, Kuwait, the UK and perhaps even Saudi Arabia, are almost certain to export less oil two years from now. Should any of these exporters go into rapid depletion the consequence is likely to be the higher gas prices voters understand.

The impact of political instability on gas prices two years from now is much harder to foresee. Unless some miracle intervenes, Iraq is in a death spiral and the likelihood of Baghdad continuing to export oil at current levels is not good. The spread of the Sunni-Shiite hostilities to other Gulf States in the next two years is possible.

Nigeria has to get through its Presidential elections in 2007 and tensions are already building in the country. Whether Nigeria will be producing oil at projected, or even current levels, in 2008 is a very open question.

There is little doubt that as oil supplies become tighter, nationalism will grow, as oil producers want a bigger share of the pie at the expense of the International Oil Companies (IOCs). Currently Venezuela and Russia are the most active in bringing their petroleum resources firmly under state control just as the Middle East did 20-30 years ago. The problem is that, as oil gets harder to produce, it is the IOCs that are the only organization with the resources and technical expertise to find and produce oil under difficult conditions. Continuing friction between the IOCs and host states could easily result in significant delays in the development of new projects.

What does all this tell us about the possible impact of high oil prices on the 2008 Presidential election? There are many situations shaping up in the world today that potentially could reduce oil production. These range from major civil wars in Iraq and Nigeria to Hurricanes and sudden drops in production from aging reservoirs. Considering the range of possible problems and the tightness of world oil supplies, it is difficult to imagine that one or more will not start putting pressure on US’s ability to import oil during the next 24 months.

The most pessimistic of the analysts trying to calculate the balance among new oil supplies, world demand, and oil depletion talk about 2008 as the earliest serious shortages could develop. A fair guess would put the chances at about 50-50 that high gasoline prices will be playing a major in the 2008 elections.

There are simply too many variables to speculate in a meaningful manner about the parameters of a 2008 energy debate. A major stoppage of production or imports in the next two years could force the current administration to take drastic measures - forced conservation, rationing - in spite of itself. Alternatively, a gradual increase of gasoline prices to new highs could bring out renewed waves of demagoguery - “lower taxes,” “forget air quality,” “hydrogen cars” - that we saw earlier this summer.

Even if all goes well and oil production manages to keep up with demand during the next two years, oil depletion does not stop. By the 2012 election the world will have gone through another 180 billion or so barrels of oil and the odds are very good that world oil production will have peaked. Whoever we elect president the next time around is likely to be facing problems fully equivalent to those faced during the Great Depression, the Civil War and the American Revolution.

» Source: Augusta Free Press

Sometime during October, according to the U.S. Census Bureau, America will add its 300 millionth resident. While profiling the candidate may be a quirky exercise in fiction writing - it will be a baby of Anglo or Hispanic parents in Los Angeles, say experts - the issues behind America’s rapid population rise are real.

The U.S. is expected to reach 400 million by mid-century. Whatever happens as a result of global warming or the energy crisis coming when world oil production peaks, overcrowding alone will make America a very different place than it is today. And not a better one.

Every day, we see the consequences of too many Americans: temper-testing traffic; a shortage of affordable housing nationwide; trash at parks and on beaches; pollution in rivers, lakes and bays; and sprawling development that covers the best farmland and diverse wildlife habitat with master-planned suburbs, miles of freeways and acres of parking lots.

Basically, everything we love about America - from amber waves of grain to purple mountains majesty - is threatened by overcrowding.

And now our population seems about to collide with global warming. Coastal communities are some of the fastest growing, and more than half of all Americans now live within 50 miles of a coastline in areas that will be vulnerable to worse storms and more flooding.

It was only in 1967 that the U.S. reached 200 million. At that time, Paul Ehrlich’s controversial book The Population Bomb, predicted that the explosion of our species would overwhelm the earth’s natural resources and lead to pestilence, war, famine and death.

But then the eco-aware 1970s gave way to the greed-is-good 1980s, and the world’s natural systems did not indeed collapse. Many people started claiming that the population bomb was a dud. Free-market enthusiasts said that better technology could feed the world for decades to come and that there was no need to worry about keeping our numbers down.

The bomb defused, for a time

“One of the reasons why the population bomb didn’t go off is because some of the warnings were heeded, and the U.S. and other donor nations started programs to help couples choose how and when to have kids in the developing world,” says Tod Preston, senior advisor with advocacy group Population Action International. “Birth rates are still very high in some areas, but they’ve come down. Our efforts have been a success.

“Yet today around the world, you still have huge and growing problems in terms of resource scarcity, water, arable crop land, forests and other resources. And that’s only going to get much, much worse if we don’t do more.”

Like many experts on population issues, Preston is less concerned with the U.S. than with developing nations, who are the main contributors to a runaway world population of 6.5 billion.

America reaching 300 million is “indicative of a much bigger story in the developing world,” Preston says. “Here we’re talking about sustainable development, sprawl, habitat loss and other problems. But if you look at the developing world, the situation is much more serious. In Uganda or Ethiopia, for example, populations are doubling every 30 years. They already have huge issues with hunger and famine and are already dependent on food aid from foreign donors including the U.S.

“Imagine if we were talking about the likelihood that our population would jump to 600 million in 30 to 40 years. There would be a strong sense that this was a very grave problem. People would term it a crisis or a catastrophe. But that’s the reality in some countries, particularly in sub-Saharan Africa. Unfortunately, it’s not being talked about much here, and some easy, popular programs to ease this crisis are being neglected by the U.S. and other rich countries.”

When you hear so much bad news from places where population growth is a problem, particularly sub-Saharan Africa, it’s all too easy to fall into fatalism and apathy. The place is beyond help, so what can we do? And anyway, doesn’t America have enough problems at home to solve before we worry about places far away?

But this kind of compassion-fatigue is shortsighted. And it is not necessary.

Overpopulation in poor countries is our problem, too

With globalization, the world’s problems are now our problems. “After 9/11, people are starting to realize that there’s no part of the globe we can write off in terms of security,” Preston says. “The Pentagon is talking about setting up a command dealing with Africa. Al-Qaeda trains there.”

So if our security requires that we try to relieve suffering worldwide, the most effective population control measure, family planning, is many times cheaper than any military option. It is even cheaper than famine relief.

Family planning has been so effective that, because of efforts to educate women and couples about contraception so that they can choose to have the number of kids they want at the time they want them, birth rates have fallen in many developing nations. In Mexico and Egypt, for example, birth rates have been halved in the last 35 years, according to Preston.

Yet despite its proved effectiveness, family planning has dropped to a small percentage of the U.S. foreign aid budget. “U.S. taxpayers spend $1 billion on food aid yearly. Last year in Ethiopia alone we spent more on food aid than we did on family planning across the planet,” Preston says.

Since it came into office, the Bush administration has cut family-planning funding significantly. Population experts like Preston say that this is not because family planning doesn’t work - it does - or that people in developing countries don’t want contraceptives - they do, even in strongly Catholic or Muslim nations - but for domestic political reasons.

Some right-wing opponents of abortion also oppose contraception, and since the White House has been eager to obtain the support of the Republican base, it has tried to distance itself from birth control. But since Americans overwhelmingly support access to contraception - 91 percent in a Harris Interactive poll from July - the administration has hesitated to declare open war on birth control. Instead, it has quietly cut funding to support family-planning programs abroad.

“This administration is in thrall to a domestic political base that is fundamentally opposed to the right of women to use contraceptives,” said Brian Dixon, director of government relations at another advocacy group, Population Connection.

“One of the first things that this president did in 2001 was to implement a global gag rule, to cut off U.S. aid to any family-planning providers around the world who had any connection to abortion.”

The gag rule said that if health-care providers wanted to receive U.S. funds, then they couldn’t even counsel patients on abortion or bring it up as an option. Because many doctors, nurses and medical aides were not willing to play by Washington’s new restrictions, they lost funding.

“The rule caused clinics to close in Zambia and Kenya, and it caused the laying off of healthcare staff. It has also led to a shortage of contraceptives in Ethiopia. But the gag rule has had no impact on abortion, except maybe to increase it, because we’ve cut off access to contraception. The U.S. no longer contributes to the UN Population Fund because the president refuses to release the funds that Congress has appropriated for it. The target in all of these cases is contraceptives.”

A problem at home

While Dixon agrees that the developing world should be the focus of family planning and other measures to control population growth, he feels that we need help in America, too.

Noting that a third of all births in the U.S. are unintended, Dixon says that “we’re not really paying attention to teen-age pregnancy, though we have the highest rate in the industrialized world.”

Though the effects of overpopulation worldwide and even in the U.S. could be horrific - imagine Blade Runner, Escape from New York or your favorite sci-fi vision of an overcrowded apocalypse - Dixon says that the main solution, family planning, is relatively simple to implement.

“The real cause for hope is that we know how to do this. There’s no need to make huge sacrifices. We’re giving people the tools to make decisions about their lives. Not only does it help the global picture but it helps individual families. Women can become part of their communities through work. Kids can go to school. Countries can catch up. It allows nations to start improving the quality of life for their people.

“Family planning is a relatively simple and cheap solution. That’s very hopeful. We just need the political will. We don’t need to find new technologies and complicated solutions. It’s really about giving people what they already want.”

Surveys consistently show that couples in developing nations want more access to birth control than they have now.

Environmentalists also support controlling population growth, but they add other solutions which are more applicable to the U.S. than a place like Egypt or Mexico.

“First, if we’re going to grow, we need to grow smart,” says Eric Antebi of the Sierra Club. That means building up and not out, and focusing new development in dense urban areas rather than letting it sprawl out into suburbs. High-density development uses less land and requires less driving, thus saving fuel and cutting pollution, especially the greenhouse gases that cause global warming.

“Second, we need to look at the international drivers of population growth. We should then look at our international policies, whether it’s our trade policies or foreign aid, to see how they exacerbate poverty and environmental degradation that tend to contribute to international migration patterns.

“Third, we need to make sure that families have the information and the resources to plan their own growth. That primarily means access to health care and family planning options. That’s as important domestically as it is internationally.”

Aside from supporting family-planning efforts both here and abroad, ordinary Americans can also mount their own personal campaigns against uncontrolled population growth and its negative effects. First, couples who want children can consider having smaller families or even adopting a child. Then, all of us can try to reduce our individual impact on the earth, to make our “ecological footprint” smaller.

Today, the average American requires about 20 acres of land to provide his or her food, water, energy and other daily needs. That means 300 million of us draw from an area twice as big as the U.S. for our needs.

One American uses as many resources and creates as much waste as 10 or 15 Chinese or Indians - and twice as much as someone from Britain or France for basically the same lifestyle.

Our population may not be the biggest, but with our unbridled consumption and criminal waste, America’s population is certainly the baddest.

So, while America’s main problem might not be cutting our population growth, we have an even more crucial role to play to build a sustainable world by just scaling down our lifestyle.

We can start by driving and flying less, buying less stuff and using less energy. Then, we can advocate for the big changes necessary to help redesign the American lifestyle away from profiting corporations and gratifying consumers and towards allowing a humane, satisfying life for families and communities.

This may be humanity’s big adventure in an age of global warming, peak oil and overpopulation.

Professor Peter Odell, an energy economist, says ExxonMobil is also vulnerable to a Chinese takeover as the large UK and American stock-listed oil groups lose their influence in global markets.

» Source: Guardian Unlimited

“A Chinese bid for Exxon and or Chevron and or a Russian bid for Shell and or BP, backed by funds provided by the wealthy member countries of Opec seem likely to be only a matter of time.

“With the ‘majors’ gone there will be concern in the main OECD countries for the future security of supplies,” he said in an unpublished speech to Opec ministers in Vienna last month.

Professor Odell, who was an adviser to Tony Benn, the UK energy minister in the late 1970s and has since worked for a host of different foreign governments, said he was not being alarmist or deliberately controversial. “Latest figures show the western oil majors are losing their leadership of the global oil system and now have only 9% or 10% of the world’s reserves. They appear unable to win new production rights except as minority partners in state-run systems,” Mr Odell says.

The Russian gas group Gazprom is keen to expand its sphere of influence outside its home country and told the Guardian earlier this year it would like to buy a British energy company.

The treatment by Russian officials of Shell at Sakhalin-2 and BP on the Siberian Kovykta field has also been interpreted as the Kremlin manoeuvring in the energy sector for political ends.

Alexander Ryazanov, chief executive of Gazprom’s oil arm Gazprom Neft, said that the unit’s healthy cashflow and help from its parent would make it easy to find up to $25bn(£13.3bn) to take a 50% stake in the joint venture, TNK-BP.

The Chinese - and the Indians - meanwhile have been using state-owned companies to expand abroad to secure supplies for their energy-hungry industries.

Professor Odell foresees a return to state-owned companies in the west too, along the lines of Norway’s Statoil and Austria’s OMV which have also been expanding fast.

He predicts a “new British National Oil Corporation, a revived Petro-Canada and a deprivatised Total in France and Belgium”. The publicly quoted companies such as Shell and BP have not helped their own plight in the eyes of those countries with expanding needs for oil, says Professor Odell, a Briton who currently works at Erasmus University in Rotterdam.

He believes western oil companies have endangered their own survival by skimping on investment and using their cash for share buybacks and “extortionate” executive remuneration packages.

Professor Odell is considered to be quite conservative but he is a sceptic about the world running out of oil fast. “The ultimate physical sufficiency of global oil and gas resources is not in doubt so that one can ignore the present-day Jeremiahs,” he told Opec ministers.

He believes the need for better order in global markets will eventually lead to the creation of a United Nations International Energy Organisation which will include input from Opec and others.

There is a “fear” premium of $7 to $15 due to the destabilisation of the Gulf region. The world energy growth started to increase significantly from 1995. Especially since 2002, the real trend of growth rate of world oil demand is well above 2.25 per cent a year. For some countries, notably China, Iran and Brazil, the growth rate is at least 4 per cent a year.

» Source: Rediff.com

The question that naturally arises is whether the high price of crude oil is due to its physical shortage, the geo-political “risk” or demand exceeding supply in the short term. Or has the time for peaking of crude oil arrived?

Peak oil

A study of the reserves to production (R/P) ratios - the number of years that reserves of oil will last at current production rates - shows that the R/P ratio of non-OPEC countries is about eight to 10 years (for instance, in the case of the US and Norway). For the Organisation of Petroleum Exporting Countries (OPEC), it is over 55 years. Indonesia and China are now net importers of crude oil. Chinese, Mexican and Canadian production will peak in the next few years. Former Soviet Union’s production peaked in 1988. OPEC production is likely to peak between 2025 and 2030.

Global demand has grown by more than 14 million barrels of oil a day in 10 years. Saudi Arabia has produced 63 billion barrels out of its 110 proven reserves since 1979, that is, more than 57 per cent of the proven reserves.

In his book, The Hydrogen Economy, Jeremy Rifkin, writing about “when there is no more oil”, notes that after the Yom Kippur war in 1974, OPEC revenues were $340 billion; by 1980, they had grown to $438 billion and are currently over $650 billion a year.

Rifkin writes: “The Times of London on April 8, 2006 ran a story headlined, ‘World cannot meet oil demand’ because it lacks the means to produce enough oil to meet rising projections for fuel demand, according to Christopher de Margerie, head of exploration for Total. Over the last four years, the world has been consuming six barrels of oil for every new one found.”

Peak oil, the day when oil production reaches its maximum and begins a steady decline until it is gone in 40-50 years, is fast approaching. Problem Day is the day when demand permanently exceeds production. It would generally happen before Peak, when demand and supply are both still rising, but when the demand is rising faster. The consequence will be a sharp and permanent rise in prices to suppress that demand, which is likely by 2010.

Mega-projects, more capacity

According to Petroleum Review (April 2006), the mega projects database shows that both Canada and the OPEC producers plan major significant new capacity additions by end 2010. The database identifies some 21.3 million barrels a day of new capacity due on-stream by 2010.

Considering that the projects that actually came on-stream in 2005 had a notional capacity of around 2.6 million barrels a day and the actual increase in 2005 was just 1.05 million barrels a day (according to IEA’s Oil Market Report, February 2006), 2006 might not be any different.

Crude oil outlook

Cambridge Energy Research Associates (CERA) sees potential for exceptional growth in non-OPEC oil production in 2006 and 2007 - a cumulative two-year increase of approximately 2.5 to 3 million barrels of oil per day. CERA concludes that the world’s oil-production capacity could increase by as much as 15 million barrels per day between 2005 and 2010 - the biggest surge in history. However, this thesis is not borne out by experience.

There are growing fears that the black gold is running dry. A small group of geologists has been claiming that the world has started to grow short of oil and that an imminent peak in production will lead to economic disaster.

Despite this obsession, what really matters to the world economy is whether we have enough affordable and convenient alternative liquid fuel to run our current fleet of transportation. The race is on to manufacture “greener fossil fuels” for blending with petrol and diesel to extend its useful life.

The EROEI factor

India is going ahead with the additives, methanol and ethanol, from jatropha plant without applying the concept of “energy returned on energy invested” (EROEI). When we substitute a source of energy - that is, oil - with a positive EROEI with another such as ethanol with a negative EROEI, there is a loss of gross energy produced.

An EROEI of one means that for every unit of energy spent or invested, you get back one unit of usable energy. When the EROEI is negative, you are actually burning up more energy than you are getting for use.

The US figures for EROEI for non-renewables are all “plus”, while for renewables, these are less than one for ethanol, switch grass and wood and negative for bio-diesel.

The Hirsch report

The Hirsch report (February 2005), by an agency of the US government deals with impacts, mitigation and risk management of “peaking of world oil production”. A sampling of recent projections from a number of eminent oil persons, geologists and energy economists predicts the peak from as early as 2006-07 (A M S Bakhtiari, Iranian Oil Company) to as late as 2025 or later (Shell). Energy economist M C Lynch says there is “no visible peak”!

Oil peaking could cost the world economy dearly. Aggressive, appropriately timed fuel efficiency and substitute fuel production could provide substantial mitigation. Peaking of world oil production presents the world with an unprecedented risk-management problem.

As peaking approaches, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social and political costs will be unprecedented. Viable mitigation options, involving literally trillions of dollars and requiring more than a decade of intense effort, exist on both the supply and demand sides.

Detailed quantitative studies to address the uncertainties and to explore mitigation strategies are a critical need.

Conclusion

First, India must work out the EROEI before venturing into additives.

Second, as no fuel in sight could fairly substitute liquid hydrocarbons (60 to 80 per cent of hydrocarbons use is for transportation), conservation and research in alternate fuels need precedence.

Third, India should initiate studies for oil price and oil demand forecasting for the next two decades.

Last, peaking is bound to occur; the question is of timing. India should commence preparations to mitigate peaking immediately.

If you believe the Dow Jones then there can only be one answer. That the market is robust, economic growth is on the move and the demand for goods and services is going to continue to suck up more and more crude oil. Equities are hot; the media is telling us corporations are strong.

» Source: Resource Investor

Then again maybe we should ask 32 year old trader Brian Hunter. He was the chief guy trading energy at hedge fund Amaranth. Last year estimates gave him a wage bill of somewhere between $75 million and $100 million and he was the hottest thing in, well, in hedgery.

But now we can see how easy it is for anyone, to get the market wrong. Remember we talked about how the perception of near-certain Gulf of Mexico hurricanes plagued the market. When the hurricanes did not arrive it was like the world had fallen off its axis. Combine that with the terrible news - for the markets - of peace in Lebanon and negotiations in Iranian nuclear issues and we had the big treble whammy.

Amaranth ended up the wrong side of $6 billion worth of losses on energy. We now know they were the highest profile casualty of the drop in the market place. It seems amazing that the whole $9.5 billion hedge fund may be sucked into liquidation on the back of the non-appearance of major storms. This commentator does not always rely on cheap shots. But what part of the word “hedge” did Amaranth not understand?

Amazingly, given the way jokers and liars proliferate in the market place Brian Hunter is no longer at the company. If we had known of his failings before we spoke about the non-appearance of hurricanes bringing down the price we could have called it Hunter’s syndrome. “Amaranth can’t comment on the specifics of his departure,” a spokesperson said. You bet they cannot. They would like to bet that they cannot, but they do not have any money left.

So if we want to sum up where the market is now you can turn two ways. To Dow Jones, or to Amaranth. Which one do you believe? Which one do you want to believe?

Right now we will stick with what we have previously said. If the Nymex West Texas Intermediate price breaks down below $57.50/$57 then Mr Hunter was wrong by an amazing distance. The price will fall until it is defended by OPEC and even some corporations. If the price sticks around the $61 mark - one we have been talking about for a while, albeit not this early in the year - then all we are doing is finding the new floor.

We could back up the bull argument with this. U.S. GDP growth for 2007 is predicted at 3%, Chinese growth comes in at 9.6% and global growth is at 4.7%. That is admittedly down on recent times but it is still healthy. If the forecasts are true then we are not going to see crude hit $100, outside of any real geo-political turmoil. But we could see oil explore the basic range between $60 or lower at $50 if something goes wrong and $80. That is until the big one.

The big one, the first time we have mentioned it, is the U.S. elections of November 2008. The U.S. administration and economics has come to dominate geo-politics and the market more than it has ever done before. In the run up to the elections there is no saying what could happen. The U.S. primaries will be more observed than ever around the world, which way will the Republicans and Democrats go? What will the effect be on oil? It is hard to say.

But in between now and then there is one possibility no one is really talking about, not a boom or a bust. But that energy gets stuck in a range. A large range admittedly, but one where we have a medium-term pause between $50 and $80. Let’s wait and see….

» Source: Counter Currents

To believe that a non-petroleum infrastructure is possible, one would have to imagine, for example, solar-powered machines creating equipment for the production and storage of electricity by means of solar energy. This equipment would then be loaded on to solar-powered trucks, driven to various locations, and installed with other solar-powered devices, and so on, ad absurdum and ad infinitum. Such a scenario might provide material for a work of science fiction, but not for genuine science. The sun simply does not work that way.

It is not only oil that will soon be gone. Iron ore of the sort that can be processed with primitive equipment is becoming scarce, and only the less-tractable forms will be available when the oil-powered machinery is no longer available - a chicken-and-egg problem. Copper, aluminum, and other metals are also rapidly vanishing. Metals were useful to mankind only because they could once be found in concentrated pockets in the earth’s crust; now they are irretrievably scattered among the world’s garbage dumps.

The infrastructure will no longer be in place: oil, electricity, and asphalt roads. Partly for that reason, the social structure will also no longer be in place: intricate division of labor, large-scale government, and high-level education. Without the infrastructure and the social structure, it will be impossible to produce the familiar goods of industrial society.

Without fossil fuels, the most that is possible is a pre-industrial infrastructure, although one must still ignore the fact that the pre-industrial world did not fall from the sky as a prefabricated structure but took uncountable generations of human ingenuity to develop. The next problem is that a pre-industrial blacksmith was adept at making horseshoes, but not at making or repairing solar-energy systems.

Fossil fuels, metals, and electricity are all intricately connected. Each is inaccessible - on the modern scale - without the other two. Any two will vanish without the third. If we imagine a world without fossil fuels, we must imagine a world without metals or electricity. What we imagine, at that point, is a society far more primitive than the one to which we are accustomed.

» Source: James Howard Kunstler

Luckily for Paris, the city officials laughed at him every time he came back with the scheme over the next forty years – and Corb was nothing if not a relentless self-promoter. Ironically and tragically, though, the Plan Voisin model was later adopted gleefully by post World War Two American planners, and resulted in such urban monstrosities as the infamous Cabrini Green housing projects of Chicago and scores of things like it around the country.

Other visions of that early period involved Tom Swiftian scenes of Everest-size skyscrapers with Zeppelin moorings on top, linked to zooming air trams, while various types of personal helicopters swooped between things. Virtually all these schemes had one thing in common: the city of the future they depicted was vibrant. We know now, here in the USA anyway, that this was the one thing they got most wrong. By 1970, many American cities were stone dead at their centers, especially the industrial giants of the Midwest. Ten years later, the American city of the future was the nightmare vision of Blade Runner, an acid rain-dripping ruin fit only for androids.

These days, a new generation of mojo architect savants such as Daniel Libeskind and Rem Koolhaas are retailing an urban futurism that is basically warmed-over Corbu with an expressionist horror movie spin, featuring torqued and tortured skyscrapers, made possible by computer-aided design, clad in Darth Vadar glass or other sheer surfaces, with grim public spaces exquisitely engineered to induce agoraphobia. There’s more than a tinge of sadism in all this, though Koolhaas is much more explicit in his many writings than the less-voluble Libeskind about consciously surrendering to a zeitgeist of cruel alienation. But these are also very rarified exercises among a tiny group of mutually-referential fashionista narcissists, while the general public itself – at least the fraction that thinks about anything – only grudgingly goes along with it as a sort of drear obeisance to the religion of art.

An alternate awful urban vision of the future, advanced by public intellectuals such as author Mike Davis (The Ecology of Fear), is actually more about the city of the present: the third world mega-slum as embodied by such ghastly organisms as present-day Lagos, Lima, and Karachi. This is a vision of plain toxic hypertrophy with no particular artistic or architectural overlay to it. These cities have organized according to a simple logarithmic progression of horrible conditions – more people, more pollution, more poverty – nourished by cheap energy globalism, with the expectation that they will only continue along that path and get worse.

Yet another vision of the future is supplied by the New Urbanists, who have campaigned for a return to the body of principle and methodology drawn from successful historic practice rather than science fiction, politics, or metaphysics. That is, they rely on urban design that has proven to work well in the past and is worth emulating – by which I mean the relations of buildings to public space and with each other, not the deployment of sewer lines and other infrastructure. The New Urbanists are marginalized because their reliance on tradition is considered sentimental and nostalgic. Their work is viewed by the mandarins of architecture through the lens of Modernist ideology, which, going back a hundred years to Adolf Loos’s declaration that ornament is crime, has worked to decouple contemporary practice from what they regard as the filthy claptrap of history. Of course, Modernism itself has self-evidently become historical in its own right, and the more this is true, paradoxically, the more its defenders insist that history does not matter. Whatever else this represents in the form of intellectual imprudence, it at least promotes a discontinuity of human experience which cannot be healthy.

The New Urbanists are also disdained for their modesty of ambition. They are not interested in the biggest this or that. Their plans are typically scaled to the quarter-mile walk and rarely include super-sized buildings. The cutting edge holds no attractions for them in and of itself. They want to create neighborhoods and quarters, not intergalactic space ports. They want the streets, squares, and building facades to provide decorum, legibility, and even beauty, while the latest crop of Modernists seek to confound our expectations about the urban environment as much as possible, in the service of generating anxiety rather than pleasure. The Modernists use the lame adjective edgy to describe their methods. It is supposed to signify excitement, novelty, and especially innovation, but mostly they have managed to innovate only new ways to make people feel bad about where they are.

The future direction of urban experience depends a great deal on an understanding of history, and of recent history in particular, because the hyper development of the past two hundred years has followed the arc of increasing energy resources and, above all, we are now facing the world-wide depletion of energy resources.

As the industrial age gained traction in the early 19th century, so did the demographic trend of people increasingly moving from the farms and villages to the big cities. Industrial production was centralized in the cities and recruited armies of workers insatiably. Meanwhile, mechanized farming required fewer farmers to feed more people. The railroad, by its nature, favored centralization. By 1900, cities such as London and New York had evolved into mega-urbanisms of multiple millions of people. Around the same time, electrification was generally complete and with it came skyscrapers serviced by elevators. Over the next twenty years, oil moved ahead of coal as the primary fuel for transport and, especially in the US where oil was cheap and abundant, led to mass automobile ownership. That, in turn, sparked the decanting of households into massive new suburban hinterlands, and to the extreme separation of activities by zoning law there, which climaxed – with interruptions for depression and war – in the evolution of the late 20th century car-dependent metroplexes like Los Angeles, Houston, Phoenix, and Atlanta. That is where things stand now.

Now my own view is that we face severe energy problems in the decades ahead and they will not be ameliorated by any combination of alternative fuels or schemes for running them. This permanent global energy crisis will have all kinds of consequences, most particularly on our cities. These looming circumstances imply several major trends which contradict conventional expectations, especially of continued urban growth.

One certain impact will be the contraction of industrial activity per se and of the financial sector whose instruments and certificates represent the expectation of growth in accumulated wealth. This alone will comprise a basic challenge to industrial capitalism – apart from the sociopolitical strife that such financial catastrophe is apt to generate.

I hasten to add it is a mistake to suppose that the US industrial economy has already been replaced by a so-called “information” economy or a consumer economy. In reality, manufacturing activities have been insidiously replaced over the past twenty years by a suburban-sprawl-building economy – and the mass production of suburban houses, highways, strip malls and big box stores is just a different sort of manufacturing than making hair driers and TV sets. The sprawl industry also drove a reckless debt creation racket and multiple layers of traffic in mortgages and spinoffs of mortgages (such as the derivatives trade based on bundled, securitized debt) which represents, at bottom, hallucinated wealth that in turn has spread false liquidity through the equity markets and is certain to affect them badly sooner or later. All this is what we have been calling the “housing bubble” and it is now beginning to fly apart with deadly effect.

Much of the suburban real estate produced by this process is destined to lose its supposed value, both in practical and monetary terms as energy scarcities get traction. So, on top of the sheer distortions and perversities of the glut in bad mortgage paper, America will be faced with the accelerating worthlessness of the collateral – the houses, Jiffy Lubes, and office parks – as gasoline prices go up, and long commutes become untenable, and jobs along with incomes are lost, and the cost of heating houses larger than 1500 square feet becomes an insuperable burden.

All this is to say that the suburban rings of our cities have poor prospects in the future. They therefore represent a massive tragic misinvestment, perhaps the greatest misallocation of resources in the history of the world. It is hard to say how this stuff might be reused or retrofitted, if at all, but some of it, perhaps a lot, may end up as a combined salvage yard and sheer ruin.

Another major impact of the coming energy scarcity will be the end of industrial agriculture. Without abundant and cheap oil and gas-based fertilizers, pesticides, herbicides, and fuels for running huge machines and irrigation systems, we will have to make other arrangements for feeding ourselves. Crop yields will go down – a big reason, by the way, to be skeptical of ethanol and bio-diesel alternative fuel schemes based on corn or soybean crops. We will have to grow food closer to home, on a smaller scale, probably requiring more human and even animal labor, and agriculture is likely to come closer to the center of economic life than it has within memory – at the same time that mass production homebuilding, tourism based on mass aviation, easy motoring, and a host of other obsolete activities fade into history.

I think this will lead to an epochal demographic shift, a reversal of the 200-year-long trend of people moving from the farms and rural places to the big cities. Instead, I believe we will see is a substantial contraction of our cities at the same time that they densify at their cores and along their waterfronts. A preview of this can be seen in Baltimore today. The remaining viable fabric of the pre-automobile city is relatively tiny and concentrated in the old center around a complex harbor system. With little need for industrial workers, vast neighborhoods of row housing built for them are either abandoned or inhabited now only by such economically distressed people that abandonment is inevitable. The pattern of contraction may not be identical in all American cities.

In some it will be a lot worse. Phoenix, Tuscon, and Las Vegas will just dry up and blow away, since local agriculture will not be possible, and they will be afflicted with severe water problems on top of all the other problems growing out of energy scarcity and an extreme car-dependent development pattern. Cities in the “wet” sunbelt such as Houston, Orlando, and Atlanta, will probably still be there but revert to insignificance for the additional simple reason that a lack of cheap air conditioning will make them unbearable.

It is worth keeping in mind that cities generally are located on important geographical sites – harbors, rivers, railroad junctions – and some kind of urban settlement is likely to persist in many of these places, unless climate change drowns them. In recent years, most waterfront property has been reassigned from industrial and commercial uses to condominium sites, and greenways. This will not continue. If we are going to have any kind of commerce between one place and another, we will have to reactivate our waterfronts for shipping – and not necessarily of the automated steel container variety. Like virtually everything else in the coming energy scarce world, maritime trade will have to be rescaled. It may even have to rely on wind power again to some extent. These operations will require wharves, warehouses, cheap quarters for sailors and all the other furnishings typically required through history.

Those who are infatuated with skyscrapers are going to be disappointed. I do not think we will be building many more of them further along in this century. We will have trouble running the ones we have, since most of the glass towers built after 1965 have inoperable windows, and even the ones that have them would have to be retrofitted for coal furnaces, and a less than absolutely reliable electric power grid may make life in a twenty-fifth floor apartment impossible when the elevators go out. In short, I think we will discover that the skyscraper was purely a product of the cheap oil and gas age. Exciting as they may be, we might have to live without them.

The process I have described will probably be messy. Social turbulence should be expected. For instance, the urban underclass will be squeezed even harder than the suffering middle classes, and they already have a nascent warrior culture that could easily redirect its energies from hip hop entertainments to real guerilla warfare if the competition for resources became desperate. Economic distress in the US is also likely to only aggravate unfavorable conditions in Mexico, sending increased streams of impoverished migrants north. Meanwhile, the faltering US middle classes may be so inflamed by the loss of their entitlements to an easy motoring existence that they will vote for maniacs and venture into scapegoating. I certainly expect the American public and their leaders to mount a vigorous defense of suburbia, even if it proves to be a gigantic exercise in futility and a waste of precious resources.

We will be lucky if we can make the transition from our current circumstances to a future of re-sized, re-scaled cities and a reactivated productive rural landscape outside them, with a hierarchy of hamlets, villages, and towns in between, and some ability to conduct commerce and manufacturing. This would, in effect, be a reversion to prior living arrangements, and to some extent it is a model proposed by the New Urbanists – or at least a template they would understand as fundamental. Many things might stand in the way of this. The physical disaggregation of civic life in our small towns is now so extreme that nothing might avail to repair it, especially since we will have far less capital to work with. The suburbs running from Boston through New Jersey to Washington have paved over some of the best farmland in the nation’s most populous region and it may be centuries before it is restored to productivity, if ever. Physical security may become so tenuous that people will sell their allegiance for protection, or take to living behind fortifications. In earlier periods of history when societies got into trouble – for instance, the plague years in Europe – rural places were beset by banditry and lawlessness, adding another layer of difficulty to food production on top of the loss of the peasant labor.

We don’t know how any of these things may actually play out. I have not even mentioned the potential for geopolitical mischief, which could skew the picture a lot more.

But the urban future isn’t what it was cracked up to be when we were riding high, surfing the big waves of cheap energy in the seemingly endless summer of oil. It won’t be fun fun fun ‘til Daddy takes the T-bird away. It won’t be a Herbert Muschamp smorgasbord of delicious, rarified architectural irony. The Koolhaas celebration of alienation will not seem worth partying for. The metaphysics of Libeskind and Peter Eisenman will stand naked in the transparency of their phoniness. By and by, even the mega slums of the third world will contract as the surplus grain supplies of the formerly-developed nations are reduced to nothing and export ceases.

I often wonder what people will think decades from now if they are able to view those old Doris Day and Rock Hudson comedies of the mid 20th century. Invariably these stories took place in a Manhattan of sparkly new glass towers, and streets full of cars with tail fins, and companies that ruled the world, and men and women who had come back from a World War full of confidence that there was no limit to what people with good intentions could do and nothing that they couldn’t handle. We are their children and grandchildren and it is a different world now.

Now here we are at the end of September. The price of crude is down nearly 25 percent. Gasoline is down 75 cents a gallon. The press is full of stories of a great new oil find in the Gulf that could show the way to a cornucopia of oil. The Dow is pushing an all-time high, and financial analysts are predicting lower inflation and solid growth in the year ahead. Finally, those who don’t want to believe in peak oil are loudly proclaiming, “I told you so.”

» Source: Falls Church

What happened? Is imminent peak oil still in the cards? Just where is reality?

The first thing to remember is that the price of oil has had a great run-up in the last five years. Way back in 2002 oil was circa $20 a barrel. Although there are many factors that go into the price of oil, they sort of group into three general categories: 1) Underlying supply and demand for the product including genuine hedging; 2) Technical factors that stem from the nature of commodity speculation: overbought, oversold, charting, stop loss orders, margin calls, etc.; 3) The sum of all the speculators’ ideas as to whether the price will go up or down— the fear factor. All of these factors are present all of the time. The eternal argument is over how much of the current price is due to which influence.

Every jump in the price of oil earlier this year brought forth remarks about the “fear factor.” Speculators were constantly afraid something so bad was about to happen that the price of oil would soon be over $100 a barrel so the current price was a great bargain.

A couple of months back this was not a bad idea to have. The forecasters were talking about a third year of giant hurricanes tearing up the Gulf. The Iranians were firing off missiles and muttering about closing the Straits of Hormouz. In Nigeria, a foreign oil worker a week was being dragged off for ransom. Israel and Hezbollah were hard at each other and were threatening to trigger a wider war. It would have been hard for a speculator not to conclude that at least one of these looming problems would result in higher oil prices.

But then the great pendulum of events reversed. One by one the fears began to melt. Diplomacy quieted much of the Middle East. The hurricanes of 2006 curved towards Europe where they harmlessly watered the fields of Ireland. Nigeria turned quiet. Chavez kept threatening, but the speculators no longer listened.

Fear factor after fear factor diminished into a perfect storm of good news. Week after week the good news for oil prices kept coming. US stockpiles continued to build. Cooler weather reduced the use of natural gas for air conditioning. A giant oil find was made in the Gulf of Mexico. Even the US economy cooperated by showing some signs of slowing, thus raising the specter of reduced demand for oil.

As the price fell, the normal technical factors of speculating came into play. The bulls bailed out. Margin calls were made. Overcommitted hedge funds went bust.

Now what does all this have to do with peak oil? The short answer is, so far, very little. Naturally, higher or lower prices will affect demand and therefore exacerbate or mitigate the supply situation. Tight supplies already are reflected in the base price of oil before we get to the speculative factors. This is how we got from $20 to $60 a barrel. If the price stabilizes in the neighborhood of $60 after the speculative premium is wrung out of the market, then we will have some idea of where simple supply and demand for oil prices the product.

Behind all the good news for oil prices, however, depletion of the world’s finite oil supply continues at 85 million barrels per day, day after day, after day. Bad news for the future of oil production continues to come out, but it is lost in the shuffle or not recognized for its importance. Many now hold that the good news of a great new oil find deep beneath the Gulf of Mexico is, in reality, bad news. If ultra deep-sea oil, which is very expensive and may take many years to exploit, is all we have left, then we are close to the end of cheap oil.

During the last few weeks, slippages in major oil exploration projects have came to light. Of particular note is the BP’s great Thunderhorse platform, which seems to have developed metallurgical problems associated with extracting oil from great depths. If this turns out to be a generic problem, then the new frontier of ultra deep-sea oil wells may be a while in coming.

The bottom line remains that peak oil is still very real and, if anything, the news from recent weeks suggests the peak may be moving closer rather than receding.

An interesting sidelight to the last few weeks has been the paranoia surrounding rapidly dropping gasoline prices. According to a Gallup poll, 42 percent of Americans, mostly Democrats, believe that the administration is deliberately manipulating gasoline prices to improve their chances in the November elections. As noted above, there are numerous factors that are more than adequate to drive down prices to current levels. Prominent among these factors is the normal drop in demand between the summer driving season and the winter heating season.

In 2005, gas and oil prices experienced a similar drop after the spike caused by the summer hurricanes.

Therefore, the message of the last few weeks is not to confuse lower gas prices with any lessening of the threat from peak oil. The peak is still out there and is moving inextricably closer. In the meantime, enjoy low gas prices while they last. OPEC is already wildly signaling that its members can’t live with oil below $60 and that production restrictions are coming shortly.

What is theory?

What an interesting quotation about theory from the good cardinal. But before we go too far along, here is the next question: What is theory? The word itself derives from the Greek word “theoria,” meaning examination, contemplation, or speculation. A theory is a doctrine, or scheme of things, which terminates in speculation or contemplation. Or you can say that it is an exposition of the general principles of a given field of study. A simple way to understand the concept of a theory is that it is the premise or set of premises upon which an argument rests, although the focus of theory is on the “science” of something, more so than the “art” thereof.

» Source: Money Week

Cardinal Newman was writing in his essays, of course, about theory in the context of the consuming power of religious faith. After all, the great Roman Catholic Newman had the word “Cardinal” in his name and was one of the leading theologians of the 19th century. But Newman’s description of the power and impact of a theory is not just a statement about religion. Had he been writing only to describe religion, perhaps he would not have used a word of such scope as “theory.” He was speaking in a broad sense.

I like Newman’s characterization of theory, that “when it once possesses us, we are no longer our own masters.” Theory can be a powerful thing. So if one is going to adopt a particular theory, and incorporate it into one’s life, it better be a good theory. The world is full enough of people running around spouting bad theory.
ExxonMobil chief: “no Peak Oil theory of value”

What prompts me to this discussion is a recent comment by the chief executive officer of ExxonMobil Australia concerning Peak Oil. The setting was the 7:30 Report of the Australian Broadcasting Corp. (ABC) on Sept. 14, 2006. ABC reporter Mike Sexton was relating comments by ExxonMobil Australia’s CEO Mark Nolan. Here is some of the transcript:

Q: The Peak Oil theory suggests at one point the world will have used more than half the oil and future demand will outstrip supply, leading to dramatic changes to our society. But big oil isn’t buying it.

Nolan: These Peak Oil theories have been around since the 1920s, particularly in times of high oil prices. Our view is that the world has abundant energy resources and that there is no Peak Oil theory of value.

Exxon’s Mr. Nolan did not amplify this last comment. He simply threw out the bald assertion that “there is no Peak Oil theory of value.” In later comments, Mr. Nolan explained the Exxon “view” that “the world has abundant energy resources.” He stated, “According to the U.S. Geological Survey (USGS), the Earth currently has more than 3 trillion barrels of conventional recoverable resources and so far we’ve produced 1 trillion of that. Conservative estimates of heavy oil and shale oil push the total recoverable resource to over 4 trillion barrels.”

I will refrain from dissecting the infamously optimistic USGS estimate of there being “more than 3 trillion barrels of conventional recoverable resources.” A lot of very good petroleum geologists and engineers have taken the USGS to task on this point, and even the USGS has backed off from its rosy view of the Earth’s “conventional” oil resources. My focus in this article is to review the Exxon man’s comment about there being “no Peak Oil theory of value.”

What Is a Theory of Value?

We have to get back to basics again. What is a theory of value? OK, we discussed theory above, but what is “value”? At a fundamental level, value relates to the worth of something, or its utility to satisfy the needs of people. So a theory of value must be the premise or set of premises upon which an argument rests, relating to the worth of something, or its utility to satisfy the needs of people. Let’s discuss this just a bit more.

The encyclopedia definition of the expression “theory of value” is that it is a generic term that encompasses all the theories within economics that explain the worth of goods and services. That is, a key question in economic theory is how the value of goods and services comes about, and how to calculate the correct value of goods and services if such a value exists. The following paragraphs are summaries of several related articles posted on Wikipedia, which contains a useful set of online links to different theories of value and describes several main categories of these theories.

The first category is called the “intrinsic theory of value.” An intrinsic theory, as the name implies, holds that the value of goods and services is a property built into the item itself. This implies that every item has a certain worth that does not depend on what people think of it. Most intrinsic valuations look at the process of producing an item and the costs involved in that process as a measure of the item’s intrinsic value. For instance, the “labor theory of value” - the most influential of the intrinsic theories - holds that the value of an item comes from the amount of labor spent producing the item. For a simple example, if it takes two workers six hours each to produce some product, then that product is worth 2 x 6 = 12 man-hours.

The second category is called the “subjective theory of value.” Subjective theories hold that for an object to have economic value, meaning a price, the object must be useful in satisfying human wants and must be not be in unlimited supply. That is, it must be scarce. This is the foundation of the “marginalist” theory of value, as seen commonly in neoclassical economics. That is, the value of something is set by the marginal purchaser, which is another way of saying that the theory recognizes that one thing may be more useful in satisfying the wants of one person than another, or of no use to one person and of immense use to another. Goods that are in unlimited supply, or in a greater supply than that demanded, would have lower value.

The subjective theory of value contrasts with the intrinsic theory of value that holds that there is an objectively correct value of an object that can be determined irrespective of individual value judgments, such as by accounting for the amount of labor used to produce a product.

The third category is called the “cost-of-production theory of value.” In economics, the cost-of-production theory of value is the theory that the price of an object is determined by the sum of the cost of the resources that went into making it. The cost can be composed of the cost of any of the factors of production, including labor, capital, land, or technology. This theory makes the most sense under assumptions of constant returns to scale and the existence of just one so-called “nonproduced” factor of production. These are the assumptions of the so-called “nonsubstitution theorem.” Under these assumptions, the long-run price of a commodity is equal to the sum of the cost of the inputs into that commodity, including the cost of money (or “interest”). Historically, the most well-known proponent of a cost-of-production theory of value was probably Adam Smith.
How does this relate to Peak Oil?

Now that we have examined several versions of the theory of value, let’s think about them in terms of Peak Oil. The central argument of Peak Oil is a serious, scientifically valid concept that relies on both historical “discovery” numbers and extraction figures for conventional petroleum. That is, you cannot extract what you have not discovered. Peak Oil is a shorthand way of saying that mankind’s ability to extract conventional oil from the Earth is “peaking” because mankind has found most of the world’s oil deposits. And it also appears that mankind has extracted about half of all of the conventional oil that will ever be extracted. This is the basic premise. Keep your eye on that ball.

By conventional petroleum, I mean the rock oil that can be made to flow from pores in a rock formation and into a bore hole in the ground, and from there be lifted to the surface of the Earth. This is the substance for which most of the world’s liquid-fuel plumbing has been installed - and through this plumbing, the world’s extraction and use is currently close to 85 million barrels per day. Conventional petroleum is the substance for which most of the world’s exploration, production, transportation, refining, marketing, delivery, and end use is geared. And conventional petroleum is the substance that “Peak Oil” predicts will be available in lower and lower quantities, starting at some time in the future, sooner or later, depending on whom you care to believe.

Conventional petroleum is a different substance entirely than so-called tar sands or oil shale. Tar sands and oil shale require quite different methodologies, certainly to extract or produce, but also to transport, refine, and deliver. The world has very little in the way of plumbing for these types of substances. Aside from the lack of infrastructure, nonconventional hydrocarbon sources have quite different, and far more negative, economies than do conventional hydrocarbons, of both energy use (energy return on investment - EROI) and monetary metrics (return on investment - ROI).

One of the great questions for the future is whether or not the world’s energy sectors, and the economies these sectors support, can make the transition from extracting, refining, and delivering conventional petroleum to delivering nonconventional product. And if the transition can occur, will it occur faster than conventional petroleum sources are depleting?
What is the Peak Oil Theory of Value?

So is it fair to say, as did Exxon’s Mr. Nolan, that “there is no Peak Oil theory of value”? Is he saying that Peak Oil brings nothing of substance to the table? What is the value of Peak Oil? Is it intrinsic? Is it subjective? Does it have a cost-of-production attached to it? Is there some useful way to fit the Peak Oil concept into all of these value systems? At the end of the day, what is it worth to be able to predict, or at least to know and understand, that the world’s capacity to extract conventional petroleum is about to go into irreversible decline? What is it worth to be forewarned?

And thus forewarned, can the mass consciousness of nations and vast populations process such a form of information and turn it to advantage?

Certainly, some adherents to the Peak Oil concept see in it, and read into it, their own hopes or biases. Is Peak Oil somehow the “end of civilization,” and are we all headed for a cold, bleak future such as James Kunstler describes in his book The Long Emergency ? Well, the “long emergency” sort of future is one option, of course. If things do not transition from the current state to some future adaptive state, then The Long Emergency may well be prophecy. But it is not the only option.

Or will things happen in a relatively positive manner, and on a scope and scale such that the proverbial “markets will save us with new technology” is true, as other commentators believe?

Is the future bleak, or is it happy and hopeful? Who knows? No one can forecast the future like some modern Oracle of Delphi. But this mortal, human inability to forecast the future does not mean that you should not take Peak Oil for what it is, which is a signal of caution toward the future trends of mankind’s energy use in general, and oil use in particular. Once cautioned, you must then move ahead as if crossing a minefield: Any one wrong step could be your last. But then again, if you plan for things, even for crossing minefields, you tend to turn the odds of success in your own favor. You might not be able to predict the future. But you can work to invent the future that you desire.

And Peak Oil is just getting started. Peak Oil is not well known outside of its own inner circles. The circles, however, are expanding. Other fields of study are picking up on the Peak Oil theme. So Peak Oil is gaining intellectual traction and respectability. What does Peak Oil mean to those on the outside of the concept? We are just now in the process of finding out as the word and understanding of Peak Oil begins to spread.

As I discussed in a recent article, “It’s a Dogma-Eat-Dogma World,” Peak Oil now is a lot like the then-developing concept of plate tectonics back in the 1960s. What was it good for? At first, the concept of plate tectonics was a curiosity, if not a scientific heresy. But when it came to be better understood, it explained a lot. Eventually, people figured out that they could even make money off of it.

In the foregoing respects, the concept of Peak Oil may well be among the most valuable theories that has ever been developed in the human mind. Peak Oil is about mankind’s relationship with its energy supply. An understanding of Peak Oil is a key to mankind understanding how to survive into the future. That seems to me like a perfectly useful “theory of value.”

» Source: Energy Bulletin

What a wonderful experience to be able to share a weekend with those who understand the need for change. I am excited and inspired and more full of hope than I have been in quite a while. I come away from the experience better informed and ready for action. I am happy about the friendships that grew out of the conference, and I am grateful for those who came to share the comprehension necessary for the next step. The time has come. We are ready to deploy our weapons of mass sustainability. Sharon Astyk made the remark that with an attendance of more than 250 people, the Third US Conference on Peak Oil and Community Solutions had more than the necessary number of people required to start a revolution. It is here. The time is now.

There are many well-meaning environmentalists moving to activate change in alternative fuel types, emission standards, pollution regulations and more. I have been dismayed though that these substitutes are at the forefront of the response to a peak in global oil production and the coming climate change. I don’t doubt that the best of intentions are in mind when these “business as usual” suggestions are made. I continue to be skeptical though concerning the effectiveness of the message that “more is still better” and “all is possible if only we believe.” Plan B has been the idea that more, bigger and faster is an acceptable idea and that we need only switch from one fuel source to another. More power plants are not a problem. We’ll just pump the pollution underground. More cars are not a problem. We’ll just fuel them with corn. More of everything isn’t a problem we’ll just… This has been the approach.

So while everyone else is scrambling to perpetuate the status quo, I went to Yellow Springs, Ohio, population 3500, to visit with a group of people who have a different idea. It’s Plan C, and it’s the idea that curtailment is necessary. Maybe we don’t need more, bigger and faster. Maybe if we re-examine the problem, we’ll find a solution so obvious and so remarkable that we will slap ourselves silly for not seeing it earlier. What if we purposely live with less? Alternative fuels are great. They will play a part in the coming energy descent. Of that I have no doubt, but will they save us? No. Misplaced faith in these alternatives could do more harm than good by perpetuating the idea that there isn’t a problem at all. This is why I’ve been in search of another perspective from which to view our problems and now I’ve found it. Here is the idea that we can shrink ourselves into safety, security and happiness. Reduction and relocalization is an idea that is not only acceptable but palatable and actually, quite tasty. Think about it - it’s exactly what we need.

Consumerism sucks. After September 11, 2001, I was told that the best thing I could do for my country was to go shopping. What a joke. There has been no real examination of the problem- we are taking too much. If the practice of consuming as much as possible leads to a better life, then it might be something worth fighting for. But it doesn’t. Americans are fat and sick and disconnected from the natural world and from each other. We are in desperate need of health, we are in desperate need of time spent outside, and we are in desperate need of quality relationships in community with others. We have become desperate people. More than one quarter of us are reported to be seeking a simpler way of life. Given a choice, I think citizens (currently called consumers) of the United States of America are ready to trade in the broken nightmares of increased growth and irresponsible expansion for the happy realities of reasonable limits that will allow them to focus on family and friendship.

On Friday evening, David Orr framed the problem and on Saturday night Vicki Robin tempered our typical response. We were ready for the alternative presented by Pat Murphy and for the vision of Peter Bane. Along the way, it was incredibly inspiring to hear from Richard Heinberg, Julian Darley, Bob Brecha, Richard Olkson, Sharon Astyk, Megan Quinn and Jeff Christian about where we are going and what might be best way to get there. I was able to spend time with some of the speakers and audio of those interviews is forthcoming. So much good thought to share. I told my wife over the phone that I would need to take the rest of the year off to digest, write about and put in practice all I had learned over the course of one weekend. How else could a summary describe the success of this conference? Maybe I could write about how easy it was to talk to strangers or how beautiful the campus of Antioch College was at the being of autumn. Instead, how about a challenge…

When I left the closing remarks of the weekend on Sunday afternoon, I lingered on the main lawn of the campus under the shade of an old oak tree. It was in full fruit and the acorns were beautiful and bountiful. I picked quite a few. Would you like one? Would you like to take a seed and watch it grow? Would you like to be a part of a revolution, because we’ve got one and it is ready to run. I will send you an acorn for care and management. I hope for a progress report now and again. It will not be a hands-off experience. It will require getting a bit dirty, caring for and being responsible about a new (very old) way of being accountable and conscious concerning how you live and what is important in life. I will send you a seed, a physical representation of a weekend spent in planning about how we will respond as individuals and as a community to peak oil and climate change. All it takes is commitment. Join me. Grow trees. Nurture life. Cultivate the spirit of change and the path towards the answer to our problems. I am excited.