Re: [asa] Peak Oil day was July 11. 2008

Not prices. Production.

jb

On 7/9/09, Dehler, Bernie <bernie.dehler@intel.com> wrote:
> 'peak oil' or 'peak oil prices?' Same thing? If demand- what statistics,
> other than price, are you looking at?
>
> -----Original Message-----
> From: asa-owner@lists.calvin.edu [mailto:asa-owner@lists.calvin.edu] On
> Behalf Of John Burgeson (ASA member)
> Sent: Thursday, July 09, 2009 9:02 AM
> To: asa
> Subject: [asa] Peak Oil day was July 11. 2008
>
> Just for the record -- about 5 or 6 years ago Glenn Morton, and to a
> much less extent me, argued on this list that the day of "peak oil"
> was less than a decade away.
>
> The argument below is that it did happen -- on July 11, 2008. From now
> on, the world will produce less each day than the day before!
>
> Burgy
>
> ---------- Forwarded message ----------
> From: Post Carbon Institute <newsletter@postcarbon.org>
> Date: Tue, 7 Jul 2009 18:22:12 -0400
> Subject: MuseLetter 207/July 2009
> To: hossradbourne@gmail.com
>
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>
> _Greetings,_
>
> _Here is MuseLetter 207 for July 2009._
>
> _Best wishes,_
>
> _Richard_
>
> _1. Peak Oil Day_
>
> On July 11, 2008, the price of a barrel of oil hit a record $147.27 in daily
> trading. That same month, world crude oil production achieved a record 74.8
> million barrels per day.
>
> For years prior to this, a growing legion of analysts had been arguing that
> world oil production would max out around the year 2010 and begin to decline
> for reasons having to do with geology (we have found and picked the world's
> "low-hanging fruit" in terms of giant oilfields), as well as lack of
> drilling rigs and trained exploration geologists and engineers. "Peak Oil,"
> they insisted, would mark the end of the growth phase of industrial
> civilization, because economic expansion requires increasing amounts of
> high-quality energy.
>
> During the period from 2005 to 2008, as oil's price steadily rose,
> production remained stagnant. Though new sources of oil were coming on line,
> they barely made up for production declines in existing fields due to
> depletion. By mid-2008, as oil prices wafted to the stratosphere, every
> petroleum producer responded to the obvious incentive to pump every possible
> barrel. Production rates nudged upward for a couple of months, but then both
> prices and production fell as demand for oil collapsed.
>
> Since then, with oil prices much lower, and with credit tight to
> unavailable, up to $150 billion of investments in the development of future
> petroleum production capacity have evaporated. This means that if a new
> record production level is to be achieved, further declines in production
> from existing fields have to be overcome, meaning that all of those canceled
> production projects, and many more in addition, will have to be quickly
> brought on-stream. It may not be physically possible to turn the tide at
> this point, given the fact that the new "plays" are technically demanding
> and therefore expensive to develop, and have limited productive potential.
>
> On May 4 of this year, Raymond James Associates, a prominent brokerage
> specializing in energy investments, issued a report stating, "With OPEC oil
> production apparently having peaked in 1Q08, and non-OPEC even earlier in
> 2007, peak oil on a worldwide basis seems to have taken place in early
> 2008." This conclusion is being echoed by a cadre of other analysts.
>
> Maybe it's a stretch to say that the production peak occurred at one
> identifiable moment, but attributing it to the day oil prices reached their
> high-water mark may be a useful way of fixing the event in our minds. So I
> suggest that we remember July 11, 2008 as Peak Oil Day.
>
> We are now approaching the first-year anniversary of Peak Oil Day. Where are
> we now? The global economy is in tatters, yet oil prices have recovered
> somewhat (they're now about half what they were in July 2008). World energy
> consumption is down, world trade is down, the airline industry is shrinking,
> and most of the world's automakers are on life support.
>
> It is too late to prepare for Peak Oil-a year too late, in fact. Now the
> name of the game is adaptation. We are in an entirely new economic
> environment, in which old assumptions about the inevitability of perpetual
> growth, and the usefulness of leveraging investments based on expectations
> of future growth, are crashing in flames. Even if economic activity picks up
> somewhat, this will occur in the context of an economy significantly smaller
> than the one that existed in July 2008, and energy scarcity will quickly
> cause most green shoots to wither.
>
> It is impossible to say what will happen in the future with regard to oil
> prices. Clearly, very high prices kill demand by undercutting economic
> activity. Thus it is possible that the barrel price of petroleum may never
> break last year's record. On the other hand, if the value of the dollar were
> to collapse, then the sky's the limit for prices in dollars per barrel.
>
> It is easier to forecast the oil supply trend: though we'll see
> level-to-rising production temporarily from time to time, in general it's
> down, down, downhill from now on.
>
> Even though Peak Oil is now in the past, its annual commemoration on Peak
> Oil Day may serve an important purpose by reminding us why our economy is
> shrinking, and by focusing our thoughts on ways to facilitate the transition
> to a post-petroleum world.
>
> What are some appropriate ways to commemorate Peak Oil Day? I'd suggest
> spending time in nature, engaging in a 24-hour oil fast, or organizing a
> neighborhood bicycle parade and solar-cooker bakeoff.
>
> Mark your calendar. What will _you_ be doing on July 11?
>
> _Help us "celebrate" Peak Oil Day by signing [6]our petition._
> Links:
> 6. http://www.thepetitionsite.com/1/peak-oil-day
>
> _2. Interview with Hervé Duval_ ([7]www.voltairenet.org)
> Links:
> 7. http://www.voltairenet.org
>
> HD: We were told by most media that the origin of the financial crisis is to
> be found within the financial system. Is that satisfactory to you or, as you
> hinted with foresight in _The Party's Over_, could the lack of confidence in
> future growth due to cheap oil production peaking also be a major factor?
>
> RH: In 2008 we saw the biggest energy price spike ever. Historically, energy
> price spikes have always led to recessions. Therefore it would have been
> reasonable to expect a serious recession beginning around the first quarter
> of 2008. In fact, the recession began somewhat earlier and has proven to be
> deeper and more persistent than any other in recent decades. This is because
> a financial collapse had also become more or less inevitable due to the
> existence of multiple bubbles in the housing and finance sectors.
>
> The impacts on the airline, trucking, and automotive industries are largely
> from energy prices; the fall in real estate values and rise in foreclosures
> is not so directly related to oil.
>
> However, at the deepest level, our societal expectation of perpetual
> economic growth is based on the assumption that we will always have
> increasing amounts of cheap energy with which to power the engines of
> production and distribution. This expectation of growth became
> institutionalized in ever-increasing levels of debt and in increased
> financial leveraging. Thus when the amount of energy available started to
> level off or decline, the entire financial house of cards came tumbling
> down.
>
> Unfortunately, world leaders have largely misunderstood the crisis. They
> assume it to be entirely financial in origin, and they also assume it to be
> transient; they believe that if we can prop up the banks sufficiently, the
> economy will begin to grow again and all will be well. In fact, our current
> financial system cannot be made to function in an era of declining energy
> supplies. We need an economy that can supply basic human needs without
> increasing the rate at which we consume resources. That will require the
> creation of monetary systems and financial institutions that are not based
> on debt, interest, and leveraging.
>
> HD: Do you think speculation on energy markets is going to gather pace again
> in spite of last year's episode? If so, according to you what is the best
> solution for the snake to stop eating its own tail?
>
> RH: Speculation in energy futures is not helpful in our collective process
> of adjusting to the winding down of the era of cheap fuel. Without some
> controls on the futures market, we are likely to see more big swings in
> fossil fuel prices, as we witnessed over the past 18 months. When fuel
> prices skyrocket, the economy takes an enormous hit-again, as we have just
> seen. When the price collapses, that discourages investment in future energy
> production.
>
> OPEC has actually helped somewhat to moderate these price swings by
> increasing or decreasing production to keep the oil price steadier than it
> would otherwise be. But OPEC is losing its already limited ability to do
> this, because most member nations are seeing declining production and have
> little or no spare production capacity. Saudi Arabia is the only major swing
> producer left, and one nation really cannot balance production rates for the
> whole world much longer.
>
> The only real solution is some sort of international agreement to ration
> production and consumption, as I suggest in my book _The Oil Depletion
> Protocol_.
>
> HD: What do you think of the growing number of scientists casting doubt on
> the human origin of climate change? Within the peak oil movement, people
> like Jean Laherrère are also very skeptical...
>
> RH: I'm not aware that the number of scientists casting doubt on the human
> origin of current climate change is growing; my perception is the opposite.
> Yes, I know that Jean Laherrère, whom I respect enormously, has raised
> questions on this score. As a geologist, he is accustomed to thinking in
> terms of millions of years, and the Earth's climate is indeed quite variable
> on such long time-scales. And so I can understand why he might wonder
> whether what we are seeing now is due to climate processes involving changes
> in solar radiation, eccentricities in the Earth's orbit-the well-known
> Milankovitch effect-and changes in ocean circulation patterns. However,
> climate scientists have thoroughly investigated the likely role of factors
> other than carbon emissions and found that they are insufficient to explain
> the warming that is currently occurring.
>
> Essentially, I concur with the conclusion of most climate scientists: that
> we humans are taking an inherently unstable system-the atmosphere and
> climate-and forcing it to its breaking point by adding enormous quantities
> of greenhouse gases.
>
> HD: What do you think about this hypothesis: the international carbon trade
> project is but a way for the financial elite to keep afloat and for the
> financially rich/resource poor countries to obtain the right to burn the
> last fossil fuel reserves in exchange for money and thus deprive financially
> poor/resource rich countries of the right to develop? To put it another way,
> the heart of the matter is not really "Are we going to burn the last fossil
> fuel reserves?" (we surely are, lest we give up on economical growth), but
> "Who is going to burn them?".
>
> RH: I am skeptical of international carbon trading schemes for many reasons,
> including the fact that they will result in the creation of an enormous
> derivatives market that will require tight regulation if huge financial
> bubbles and crashes are to be avoided. Carbon caps are necessary, but there
> are probably better ways of enforcing those caps than the creation of a new
> class of derivatives; for example, a rationing system that engages the
> entire citizenry, such as Tradeable Energy Quotas (TEQs), could work.
>
> In the end, fossil fuels will be used by those who can pay for them.
> Sometimes this occurs indirectly: China burns coal on behalf of North
> America and Europe so that it can produce cheap goods for export.
>
> In any case, however, development based on consumption of fossil fuels is no
> longer a path to wealth and security, as it was in the early 20^th century.
> Today it is a trap. It merely creates dependence upon energy sources that
> are becoming more scarce and expensive. Poor nations will now be much better
> off avoiding that trap altogether.
>
> I realize that this is much easier for a mere a journalist to say than for a
> leader of some nation whose people have been denied the benefits of the
> modern era. However, this is one of the stark realities of this still-new
> century.
>
> HD: What should be the priority in terms of public decision-making?
> Preparing for the energy crisis or climate change?
>
> RH: In many respects, the solutions to both problems are similar: reduce
> fossil fuel dependency, and increase renewable energy production.
>
> However some proposed solutions to the climate crisis make no sense in light
> of fossil fuel supply limits. An example is the capture and storage of
> carbon from coal-fired power plants. This is a project that will require
> enormous investment and decades for deployment; but meanwhile, coal prices
> will be escalating, and this fact is seldom included in the cost estimates
> for "clean coal." The peak of world coal production is probably less than
> two decades away, as I discuss in my new book [8]Blackout: Coal, Climate and
> the Last Energy Crisis. It therefore makes more sense to use scarce
> investment capital to build renewable energy production capacity rather than
> to build a vast, costly infrastructure to support continued use of a
> depleting, increasingly expensive, carbon-intensive fuel.
> Links:
> 8. http://www.richardheinberg.com/Blackout.html
>
> HD: Do you see an increasing trend toward resource conflicts? If so, how do
> you explain it?
>
> RH: This is to be expected. Humans have always fought over essential
> resources. Now that the energy resources that fuel modern society are poised
> to become more scarce and valuable, it is foreseeable that conflict over
> control of those resources will increase. Given this, it is incumbent upon
> policy makers at the national level to anticipate where such conflicts are
> likely to erupt, and to seek to prevent them. Ultimately the only way to do
> so is to reduce competition for those resources by reducing dependence upon
> them where possible (some resources, such as water, we simply cannot do
> without), and by forging agreements to limit production and consumption of
> fossil fuels via depletion protocols.
>
> But of course this will require an enormous shift in attitude on the part of
> world leaders. Currently their thinking revolves entirely around gaining
> competitive advantage-in essence, they are more interested in knowing how to
> win resource conflicts than in how to avoid them. And that is an
> increasingly dangerous way of thinking as the world becomes more populous
> and resource-constrained.
>
> HD: According to you, how big is the part played by the increase in
> fuel/fertilizer/pesticides costs in the developing food crisis?
>
> RH: There are some aspects of the food crisis that do not immediately seem
> to be related to fossil fuel dependency. For example, there are increasing
> shortages of fresh water for irrigation-but many times this is due to
> climate change, which is in turn due to carbon emissions from the burning of
> fossil fuels. Then there is soil erosion-but this is often caused by modern
> industrial production methods involving the use of tractors and other
> fuel-fed farm machinery. Another factor is the genetic uniformity of modern
> crops, which makes them more susceptible to evolving pests, and hence
> requires the use of more petroleum-based pesticides. As one follows out the
> causal chains leading to these disparate threats to our food system, nearly
> all of them tend to lead back to one source.
>
> Altogether, our modern fuel-based food system is critically vulnerable on
> many levels, and most of that vulnerability is traceable to our reliance on
> fossil fuels. The inevitable reduction in the supply of tractor fuel will
> hurt farmers, and agricultural chemicals will become increasingly
> unaffordable. High petroleum prices will make the long-distance distribution
> of food more costly. Climate change and drought will shrink crop yields.
>
> We face a global food crisis that is entirely foreseeable, and whose causes
> are obvious. The needed policies are also obvious: we must reform our entire
> food system so as to reduce its reliance on fuel.
>
> HD: Can you tell us briefly about the goals and impact so far of the work
> you are doing with your colleagues at Post Carbon Institute?
>
> RH: Currently we are assembling a stellar group of Fellows who share a
> similar understanding of the global crisis, and who are interested in
> collaborating with regard to public education. We see this as a critical
> historical moment for rethinking our culture's basic assumptions about
> economic growth, energy consumption, food systems, climate change, and
> population-issues that are closely intertwined, but rarely addressed
> systemically by policy makers.
>
> At the same time, Post Carbon Institute is working closely with the
> [9]Transition Initiatives, which is a grass-roots network of communities
> seeking to promote a post-fossil fuel economy. Unless needed policy changes
> are being adopted, modeled, experimented with, and promoted by individuals
> and communities, national leaders will continue to drag their feet.
> Links:
> 9. http://transitionus.org
>
> We see the current economic crisis as a fundamental and historic turning
> point. The global economy has reached non-negotiable limits to growth. Now
> everything depends upon our willingness to cooperatively adapt to those
> limits.
>
> We believe that life can in fact be better without fossil fuels, and without
> continual growth in population and consumption. But the transition from our
> current fuel-fed growth paradigm to a steady-state, renewable-energy future
> will likely be very difficult. Humanity will get there one way or another:
> resource limits ensure that. We simply want to make the transition easier,
> fairer, and more survivable for all concerned.
>
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> Links:
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