Folks,

While the American press may still be dragging its heels, the Peak Oil and Gas problem is receiving widespread coverage in the world press, especially in the UK and major oil-producing countries. One startling example was this:

The Archbishop of Canterbury has also addressed the moral issues of Oil Depletion, commenting perceptively “How supplies are to be secured at existing levels becomes a grave and moral question for the wealthier states, and a real destabiliser of international relations…………. And in a world of severely limited supply, it is also clear that for the less economically advantaged countries the chances of equal access to fossil fuel supply is negligible” see www.gci.org.uk/speeches/Williams.pdf

I’ve become accustomed to hearing top oil company execs and energy and finance ministers warn about oil depletion, but…the Archbishop of Canterbury!?

Here’s a recent sampling of articles on the subject, and I encourage you to read every word of them. Sure, they’re long, and sometimes technical. But I believe there is no topic more deserving of your attention and self-education. Especially if you have children. As post #389 in the August newsletter of the Association for the Study of Peak Oil and Gas (ASPO) so pithily put it, “Politically this brings us firmly into the domain of Yimtoo – Yikes! In my term of office!”

So let’s get right to it, and start with that newsletter. This is very good reading packed with solid information. I highly recommend it!

ASPO August Newsletter

by Colin Campbell

NEWSLETTER No 44 –AUGUST 2004

A choice quote:

The Second Half of the Oil Age now dawns. It is characterised by the decline of oil production and all that depends on it, including most significantly the Financial System. In logic, the onset of oil decline undermines the very foundations of the economic system, which may accordingly collapse long before oil runs out or becomes in serious short supply. It sounds as if we therefore face a repeat of the Great Depression of the 1930s, which lasted ten years before being rescued by the economic impetus of the Second World War. It is not just a matter of trying to perpetuate the present system by turning to a windmill, solar panel or nuclear reactor, but of facing a fundamental discontinuity without precedent, triggered by the perception of peak as such. The recognition of the End of Economics will likely have a greater impact than the actual gradual physical decline of oil itself. The enormity of the issue explains why Governments cannot bring themselves to plan or prepare. It may even prompt some to indulge in resource wars to evade the situation for as long as possible or at least until after the next election.

Next, a May update from the Oil & Gas Journal:

World oil production capacity model suggests output peak by 2006-07

Simulations of the World Oil Production Capacity (Wocap) model suggest that global oil production will peak at a point near 81 million b/d well before the end of the decade, likely by 2006-07

Even by this model–which concurs closely with the predictions made by Matthew Simmons, the Bush advisor and energy investment banker–the peak will definitely occur no later than 2008. That’s right around the corner.

No foolin’. You’ve got two, maybe three years, folks, to make a new plan.

Simmons has earned more recent press, himself, as discussed in this recent post to the Petroleum News journal:

Simmons hopes he’s wrong

Leading energy analyst believes Saudi Arabia’s crude oil supply near peak; calls for greater global reserve transparency to anticipate ‘cataclysm’

F. Jay Schempf

Petroleum News Contributing Writer (Houston)

Week of August 01, 2004

Turning for a moment to the investment angle, this recent article by Jon Markman is quite good, and points up the problematic relationship (I call it a deadly embrace) that we have with the Saudis, and ties it in nicely with the Enron debacle:

Is Saudi Arabia Running Out of Oil?

by By Jon D. Markman

Columnist, MSN Money

7/29/2004 7:03 AM EDT

Disclosure: I have put my money where my mouth is in recent months, and invested in a variety of oil and gas stocks, particularly in the refining and transportation sectors. And I’m doing pretty well with it, thank you very much. Perfect hedge for a guy in the solar business, I think. If you’re interested, here’s a chart of a few of my current favorites: Chris’ oil & gas stock picks

Now let’s turn to politics. As has been widely reported, Dick Cheney himself has publicly warned about global oil depletion, stating in a 1999 speech:

That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? Governments and the national oil companies are obviously controlling about ninety per cent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow.

Five years later, that progress continues to be slow. The Saudis have pretty much tapped their excess production capacity in their recent production hikes (already well above their quota), and they are the only ones who had any excess capacity at all. Just today, they confirmed it:

Early Tuesday, the president of OPEC, Purnomo Yusgiantoro, warned that the cartel couldn’t immediately increase output from current levels, which are already the highest in over 25 years.

Saudi Arabia, the world’s largest oil exporter, “can increase production, but it cannot do it immediately,” Yusgiantoro said. The country had previously assured the market that it intended to ramp up production by the first of August.

The next-biggest source of oil, Iraq, is still a long way from increasing production to significant levels, and gives every indication of remaining a very difficult place to build and protect oil facilities. We could go on down the list, but in each case, there are daunting challenges that will make tomorrow’s oil much more expensive than today’s.

This article deals with the public statements of Cheney, the heads of Exxon-Mobil, and the Saudi company Aramco, along with other major players, and gives an interesting peek into the formation of US oil policy:

Dick Cheney, Peak Oil and the Final Count Down

Published on Wednesday, May 12, 2004 by Association for the Study of Peak Oil

By Kjell Aleklett

Kjell Aleklett is the President of the Association for the Study of Peak Oil

In that article, the author refers to the original transcript of Cheney’s speech, which was once posted on the website of the Institute of Petroleum, but has since been taken down. (I wonder why?) Well I tracked it down, and here it is:

Full text of Dick Cheney’s speech at the IP Autumn lunch 15 November 1999

Here are a few choice quotes. You have to translate the bureaucratic style of speech, but once you do, you realize that he’s addressing the changes that energy companies will have to make in the coming years, straight up:

In many ways the traditional role of oil companies are changing. Increasingly we are seeing international oil and gas companies concentrating on managing investment, financial, commercial and political risk or above ground risk, while service companies are managing technical, completion and operating risk. Meanwhile, national oil companies are focused on managing their country’s national interest and its resources and in the domestic markets. [Emphases added]

[...]

“we will obviously have the super majors, but they have to be careful to avoid the dragdown of facts…”

Pretty potent, direct stuff! The reference to the “dragdown of facts” is, I presume, an oblique nod to the problem of Peak Oil and/or the problem of overstated reserves that now need to be revised downward. (And now we know why that article was taken down from the site: it was 1999, Cheney was still the CEO of Halliburton, he wasn’t the Vice President yet, he was talking to a friendly and financially interested audience, and he had yet to meet in secret with the heads of oil & gas companies to rewrite US energy policy according to their whim. He was much freer to speak his mind then!)

On a somewhat more optimistic note, Powerdown: Options and Actions for a Post-Carbon World, the new book by Richard Heinberg is out! It’s “a brilliant analysis of the options available to a civilization facing resource depletion, biosphere collapse, and financial insolvency.” You can buy it here on the website of the Post-Carbon Institute. The Institute’s Communications Director actually encourages readers to buy it from their local bookstores if they can, and to request that their local libraries carry it, and offers them a library discount. See his letter here: David Room’s letter to readers

It’s about time to let Dr. Chomsky weigh in, from his July 26 blog entry:

Peak Oil Theory

Posted by Noam Chomsky at July 26, 2004 10:43 AM

The basic theory is incontrovertible. The only questions have to do with timing and cost. …

The date can be pushed back much farther if more costly (or maybe some to-be-discovered improved) technology is used. As for the estimates of cost, by reasonable standards one could argue that oil is far under-priced. In real terms, it’s not particularly high now as compared with other commodities, from some reasonable base line. And low-priced oil leads to heavier use and less effort to create sustainable alternatives.

That I think is a far more serious problem than production peaking. In fact, one could argue that the earlier production peaks, the better off the human species (and a lot more) is, because of the effects of unconstrained use of hydrocarbons on the environment.

Talk about “shrinking our economies” is pretty meaningless. Our economies would shrink substantially if we got rid of huge expenditures for the military, for incarceration, and other highly destructive activities. Sustainable economies might lead to highly improved quality of life.

Which echoes the article “Oil Drought could be our Saviour” from The Guardian Newspaper, Monday July 19 2004 by Colin Hines (see post #398 in the ASPO newsletter, above). A quote:

Economic globalisation with world trade taking place over ever greater distances has accelerated the shift worldwide to an environmentally and socially destructive form of energy intensive agriculture. This concentrates less on supplying local markets and instead contributes to evermore long distance food exports. But perhaps most important in terms of the future of our planet this new and inescapable world of continued high energy prices can lead to a rapid and massive investment in energy efficiency and renewables. This is also crucial in attempting to head off climate change at the pass. Thus geology, with its unavoidable constraints on oil supplies, could well become the planet’s Seventh Cavalry.

To give us a nice pair of bookends on this blog entry, let’s let the Archbishop have the final word (from the same speech):

And the news for humanity is both joyful and sobering: there is a possible human future – but it will be costly for us. The question is whether we have the energy and imagination to say no to the non-future, the paralysing dream of endless manipulation, that currently has us captive.

So! Bring on the $180/barrel oil and the $10/gal gasoline! (You think I’m kidding? I’ll give it ’till 2007.) The more it costs, the more time and options we’ll have. We’ve got ingenuity. There is some reason to be optimistic. But only if we can change our political and economic priorities.

And that’s where you come in. I hope that even the conservatives among you will acknowledge that the continued pursuit of oil and gas industry priorities is not going to chart us a successful path into the future. We must invest–now, and massively–in renewable resources. Bush offers the former. Kerry offers the latter. Compare:

“We need an energy bill that encourages consumption.”

– George W. Bush, Trenton, New Jersey, Sep. 23, 2002

–vs.–

“To secure our full independence and freedom, we must free America from its dangerous dependence on Mideast oil. By tapping American ingenuity, we can achieve that goal while growing our economy and protecting our environment. Kerry-Edwards will create a new energy and conservation trust fund to accelerate the development of innovative technologies, such as more efficient cars and trucks, the development of biofuels, and creating clean, secure, hydrogen-based energy. Kerry-Edwards will also expand the supply of natural gas, assure 20% of electricity comes from renewable sources by 2020, and make clean coal part of our energy solution.”

– John Kerry’s Plan for America

Any questions?

I have much, much more on the topic to share with you, especially as it ties in to the war in Iraq, the so-called war on terrorism, the Enron debacle, and the Saudi connections. But that’s enough for now I think. I’d be surprised if even one of you read all of those articles anyway, so I don’t want to give you too much at one sitting.

Please, please, read up! As always, your feedback is welcomed and encouraged! Pass this on to your friends and family (especially those who think our “oiligarchy” has the situation well in hand), and invite them to subscribe to GRL too. My only intent is to wake America up to her energy situation. The more the merrier.

–C

Further reading:

Past GRL articles on Peak Oil

Past GRL articles citing Matthew Simmons