Ecobella Blog

The world will never ran out of oil.  That is the simple truth, whether you like it or not.

To keep demand and supply balanced, the price of oil will rise.

At a given point, other fuels will start replacing oil.

In the future our economy will no longer depend on oil.

This would be the happy ending of a fairy tale.

Hold on…  While this transition takes place, hundreds of millions (maybe even billions) of people will see their well being vanished.  At the same time, the world will see new billionaires (maybe even a trillionaire) flourish.

Are we in agreement?

The big million-dollar question is what happens from here to there…and what can we do to be prepared?

No doubt the transition is going to challenge our civilization.  It’s our challenge.

So what happens when there is a net decrease in energy flow through our civilization for we are absolutely dependent upon increasing flows of concentrated energy to evolve, grow, to form and maintain our complex civilization?

This point is not rhetorical, access to increasing flows of concentrated energy, which can be transformed into work and dispersed energy, is the foundation upon which our civilization stands. Yet we are at a point where these flows are, with high probability, about to begin decreasing.

There is growing concern, as expressed by Maquarie Bank, Goldman Sachs, McKinsey consultants, the International Energy Agency and the Saudi Oil minister Ali Naimi amongst others, that as the global economy begins to recover we will experience another rise in oil prices which will choke off further growth or in the words of Ali Naimi, constrained or declining oil production will “take the wheels of an already derailed global economy”.

Oil contributes to about 40% of global energy production, but over 90% of all transport fuel. It provided the physical linkages of good and people across the globalised economy.

We should intuit that an energy withdrawal should have major systemic implications, for without energy flows nothing happens.

Once the effects of decline become apparent, we could lose much of what we might call the operational fabric of our civilization. The operational fabric comprises the given conditions at any time that support system wide functionality. This includes functioning markets, financing, monetary stability, operational supply-chains, transport, digital infrastructure, command & control, health service, institutions of trust, and sociopolitical stability. It is what we casually assume does and will exist, and which provides the structural foundation for any project we wish to develop.

How could our economy choke? How could we loose grip?

When oil was at $135 per barrel, the US was spending the equivalent of $1Trillion per annum for oil, which is equivalent to 15% of US take-home pay for all taxpayers, nor does this percentage account for indirect rises associated with food (highly fossil-fuel dependent, and competitive with bio-fuels), and natural gas (price correlated). This hit discretionary consumption and put pressure on peoples‟ ability to service their loans.

Current biofuel production is 1.45 mb/d. However the energy content of a barrel of biofuels is much less than the energy content of a barrel of oil that is replacing, so in energy terms current biofuel production is about 1mb/d. To produce at this level has taken years of growth and subsidies, we would need to expand the industry by 275% in the first year alone, when even at the industries height it had a maximum growth rate of less than 30%.

Global food production is already straining against a rising demand and the stresses of soil degradation, water constraints, over-fishing, and the burgeoning effects of climate change. It is estimated that between seven and ten calories of fossil fuel energy go into every one calorie of food energy we consume. For example, it has been estimated that without nitrogen fertilizer, produced from natural gas, no more than 48% of today’s population could be fed at the inadequate per capital level of 1900. Today it is true to say that no country is self-sufficient in food production.

Do you think this is pessimistic science fiction?

Well two-thirds of oil producing countries has already passed their local peak. For example, the United States peaked in 1970, and the United Kingdom in 1999 and decline has continued in both cases. It should be noted that both countries contain the worlds‟ best universities, most dynamic financial markets, most technologically able exploration and production companies, and stable pro-business political environments. Nevertheless, in neither case has decline been halted.

As large old fields producing cheap oil decline, more and more effort must be made to maintain production with the discovery and production from smaller and more expensive fields. In financial terms, adding each new barrel of production (the marginal barrel) becomes more expensive. Sadad al-Huseini said in 2007 that the technical floor (the basic cost of producing oil) was about $70 per barrel on the margin, and that this would rise by $12 per annum (assuming demand was maintained by economic growth). This rapid escalation in the marginal cost of producing oil is recent. In early 2002, the marginal barrel was $20.

Manfred KISSLING

Editor

Related article:  FEASTA

Scientists are unable to account for about half of the heat that is believed to have accumulated in the atmosphere in recent years as a result of the burning of fossil fuels, according to a new study. Using data from satellites and other sources, scientists from the U.S. National Center for Atmospheric Research (NCAR) calculated how much heat should have been measured on Earth as a result of incoming solar energy and heat-trapping greenhouse gases. Reporting in the journal Science, the researchers said that increases in ocean and air temperatures account for only half of the heat that should have built up on Earth since 2003. The extra heat may be accumulating deep in the oceans, below 3,000 feet, where few measurements are taken. It may also be manifesting itself in the rapid onset of the El Nino weather pattern last year, or the swift melting of glaciers worldwide. In any case, NCAR scientist Kevin Trenberth, lead author of the paper, said it is imperative that scientists devise methods to better measure the flow of energy through the Earth’s climate system. “That heat will come back to haunt us sooner or later,” said Trenberth. “It is critical to track the build-up of energy in our climate system so we can understand what is happening and predict our future climate.”

Source: YALE 360

• Shortfall could reach 10m barrels a day, report says
• Cost of crude oil is predicted to top $100 a barrel

The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.

The energy crisis outlined in a Joint Operating Environment report from the US Joint Forces Command, comes as the price of petrol in Britain reaches record levels and the cost of crude is predicted to soon top $100 a barrel.

“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day,” says the report, which has a foreword by a senior commander, General James N Mattis.

It adds: “While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India.”

The US military says its views cannot be taken as US government policy but admits they are meant to provide the Joint Forces with “an intellectual foundation upon which we will construct the concept to guide out future force developments.”

The warning is the latest in a series from around the world that has turned peak oil – the moment when demand exceeds supply – from a distant threat to a more immediate risk.

The Wicks Review on UK energy policy published last summer effectively dismissed fears but Lord Hunt, the British energy minister, met concerned industrialists two weeks ago in a sign that it is rapidly changing its mind on the seriousness of the issue.

The Paris-based International Energy Agency remains confident that there is no short-term risk of oil shortages but privately some senior officials have admitted there is considerable disagreement internally about this upbeat stance.

Future fuel supplies are of acute importance to the US army because it is believed to be the biggest single user of petrol in the world. BP chief executive, Tony Hayward, said recently that there was little chance of crude from the carbon-heavy Canadian tar sands being banned in America because the US military like to have local supplies rather than rely on the politically unstable Middle East.

But there are signs that the US Department of Energy might also be changing its stance on peak oil. In a recent interview with French newspaper, Le Monde, Glen Sweetnam, main oil adviser to the Obama administration, admitted that “a chance exists that we may experience a decline” of world liquid fuels production between 2011 and 2015 if the investment was not forthcoming.

Lionel Badal, a post-graduate student at Kings College, London, who has been researching peak oil theories, said the review by the American military moves the debate on.

“It’s surprising to see that the US Army, unlike the US Department of Energy, publicly warns of major oil shortages in the near-term. Now it could be interesting to know on which study the information is based on,” he said.

“The Energy Information Administration (of the department of energy) has been saying for years that Peak Oil was “decades away”. In light of the report from the US Joint Forces Command, is the EIA still confident of its previous highly optimistic conclusions?”

The Joint Operating Environment report paints a bleak picture of what can happen on occasions when there is serious economic upheaval. “One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest,” it points out.

Source:  The Guardian