You may be right about the peak as history, but there are two reasons why you may not be: politics and economics.
In an economic downturn, demand drops and producers have less motive to produce. This will eventually turn around.
Saudi Arabia has proved it can increase production if it decides to do so, but Iran and Iraq also have huge reserves, ranking second and third in easily producible oil. Both Iran and Iraq have been producing largely without the benefit of modern technology for years. It stands to reason they both could greatly increase production if their political systems made it a priority. (Iraq is now trying to attract investment from Western companies, but their terms have been so unattractive that they've had few takers. They'll learn.)
Don
----- Original Message -----
From: John Burgeson (ASA member)<mailto:hossradbourne@gmail.com>
To: asa<mailto:asa@calvin.edu>
Sent: Thursday, July 09, 2009 9:01 AM
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<mailto:newsletter@postcarbon.org>>
Date: Tue, 7 Jul 2009 18:22:12 -0400
Subject: MuseLetter 207/July 2009
To: hossradbourne@gmail.com<mailto: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<http://www.thepetitionsite.com/1/peak-oil-day>
_2. Interview with Hervé Duval_ ([7]www.voltairenet.org)
Links:
7. http://www.voltairenet.org<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<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<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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Burgy
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Received on Sat Jul 11 01:41:11 2009
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