A Perfect Storm Cometh: Oil Price Touches $100 a Barrel; Signal of Pending Oil Shortages Ignored

Sunday, January 6, 2008

Oil Price Touches $100 a Barrel; Signal of Pending Oil Shortages Ignored

The price for West Texas Intermediate (WTI) oil touched $100 on January 2, 2008, a new milestone. According to TheOilDrum.com, WTI oil price has been giving a very clear signal of pending shortage for over five years now, and in breaching the symbolic $100 a barrel mark, continues to do so. Those driving the world economy have steadfastly ignored this red warning light. In doing so, they are steering the world toward an energy disaster characterized by shortages, high energy prices, inflation, growing inequity, civil unrest and famine.

(PRWEB) January 4, 2008 -- Oil Production Graph Data for graph

A Signal Ignored
...The $100 a barrel price is a sign that times will never be the same again. According to TheOilDrum.com, the world is entering a new era, where the supply of energy will come to dominate the political landscape in a way that is currently not recognized by any of the leading candidates.

Over the past two years, citizens have been repeatedly assured that there is no problem with future oil supply... the public has heard false promises of lower future prices, and been beguiled by the possibility of a price collapse in the face of excess supply...

Both oil and natural gas resources around the world are found in underground reservoirs of a finite size... As the quantity of oil remaining in place falls, the rate at which oil can be recovered also falls... This happened to the United States in 1970... oil production... has since declined from... 9.6 million barrels a day (mbd), to ... 5 mbd. ...the North Sea, the Alaskan fields on the North Slope, and the huge Cantarell field in Mexico have entered irreversible decline... the world is now reaching the point where all of the oil fields of the world are in aggregate coming to peak production... countries that still have a surplus of oil to export are seeing ...an increase in their own demand for oil, which reduces the amount that can be made available for export... The increasingly limited ability of nations such as Saudi Arabia and Russia to increase oil production is already becoming evident, leading to a reduced potential for raising world production. It now appears unlikely that the world will ever see a daily oil production rate of 90 mbd, even when natural gas liquids and condensate are included. Thus, future projections that speak glibly of numbers above this level are foisting a canard on the world's population that all will come to regret...
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More information on peak oil and its impacts on energy security is available on The Oil Drum website (http://www.theoildrum.com/).

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Where We Stand

Economic Crisis

Peak Oil
* Peak production appears to have occurred in 2005 or 2008. Certainly, production has been on a plateau since 2004-5. The recession and the high prices from last year caused falling demand. This is brought on lower prices. That caused new production projects to be slowed, delayed or stopped. Because starting up projects takes much longer than shutting them down, this will likely lead to oil shortages if the economy and demand rebound, certainly by 2012 or so.

UPDATE Nov. '09: The new IEA World Energy Outlook revised **downward** to 105 million barrels a day it's projections for future oil production. What they are saying is, over the next 20 years, we won't be finding much oil. Whistle blowers, one still employed, one not, say even this is wishful thinking. We agree. We have thought so for two or three years. They also say the decline rate is higher than admitted - and it was already 4.2%!!! This means we are looking at, what? Six percent? Eight? At six percent we lose the equivalent of Saudi Arabia every two years. Of course, we aren't finding that much new, recoverable oil each year and haven't for decades. Where's the extra coming from?

** Peak occurred from 2005 to 2008. It is slightly possible we could exceed past production in the next two years *if* there is economic growth as there is some spare capacity and some new spare capacity came on this year. There appears to be just enough new oil coming online - or there would have been if projects hadn't been shut in due to the economic crash - the next two years to barely stay even. After that, decline will have eaten away two Saudi Arabias and it will be impossible to reach a new high.

* Production surpasses new oil discoveries by a margin of 3 :1 or 4:1. This is unsustainable.

*The global economic downturn may decrease these numbers, which would help slow the fall down the back slope of the decline curve.

* The "Export Land" Model (.pdf) shows increased consumption in oil exporting nations leads to decreasing exports. Exports dropped by 3% in 2006. For oil importing nations, this means oil availability falls 2x to 3x the global decline rate.

* Current prices make some alternative energy projects economically infeasible. While oil is depleting and declining, the low prices and economic crash are impacting our ability to ramp up renewables to replace fossil fuel-based energy.

* OPEC has announced (1/2/08) future production is in peril. Many believe OPEC cannot raise their current production by more than 3 million barrels a day. Ever. Or can do so only at the cost of future production. I.e., they must choose between their own citizens and the rest of the world.

* A nice, but older, overview (.pdf). Its age, 2005, makes the time lines a little longer than seems probable. Still, excellent forecasting.

People & Power - Peaked - 06 Jan 08 - Part 1.
(Part 2 can be found on youtube.)
An excellent overview of Peak Oil right now.

Climate Change
* James Hansen, et al., published some very important papers (article) this year. Conclusions are thus:

1. The world is at @ 392 ppm CO2, but irreversible climate change happens at just 350, which we passed decades ago. This is why time is shorter than it seems.

2. The goal now is to stop warming at only 2 degrees C. This will still mean seas rising a meter or more and climate change globally, but we may be able to stabilize there. It also means reducing carbon emissions by 90% by 2100. That's creating an entirely new energy system in less than a century. We did that already, but that was when there was virtually no infrastructure in place.

3. Action must be taken in a very short time period. Waiting ten years is almost certainly too long. The silver lining that comes with Peak Oil? It may give us no choice but to act sooner rather than later. The solutions for Peak Oil and Climate Change are the same (except for bio-fuels.) This situation is unprecedented in human history.

* The Arctic melted to an extraordinary degree in 2007 and nearly as much in 2008 - despite perfect conditions for 2008. This is THE canary in the coal mine. Back in February, when the first of three IPCC (Those rock-n-rollers of recent Nobel fame.) reports came out and didn't include ice melt in their projections, I was stunned. Various scientists, also. I knew viscerally that change was coming faster than they stated. Much faster. The summer melt validated that view. Hold on to your hats. f you know anything of Chaos, bifurcations, tipping points and non-linear systems, you're probably as scared as I am.

* New findings of methane being released from the Arctic permafrost and sea floor, along with increased atmospheric methane are ominous signs we may be well past key tipping points. There have been massive, abrupt climate changes in the past due to the release of methan clathrates from the sea floor.

The Big Melt - Arctic ice melt accelerates by 20+%.

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Sunday, January 6, 2008

Oil Price Touches $100 a Barrel; Signal of Pending Oil Shortages Ignored

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