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Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'

by Jerome a Paris Sun Jan 22nd, 2006 at 09:16:26 AM EST

On Friday, the Independent published a very long and very detailed article on peak oil and its likely consequences which I can only encourage you to read in full - but be warned that you'll likely end up horribly depressed from that reading. It's damning, it's terrifying, and it's all true. It's written by Jeremy Leggett, an eminent geologist and one of the grand names of the ASPO (Association for the study of Peak Oil).

Here's a taste anyway, with a few added graphs, as usual.

The killer paragraph:

1. The biggest oilfields in the world were discovered more than half a century ago, either side of the Second World War.

2. The peak of oil discovery was as long ago as 1965.

3. There were a few more big discovery years in the 1970s, but there have been none since then.

4. The last year in which we discovered more oil than we consumed was a quarter of a century ago.

5. Since then there has been an overall decline.

All that information is conveyed in this graph, courtesy of Colin Campbell:

UPDATE - the article in the Independent is now behind a firewall, but can be read here.


The first issue is to acknowledge how horribly dependent on oil - and cheap oil - our whole "civilisation" is.

We have allowed oil to become vital to virtually everything we do. Ninety per cent of all our transportation, whether by land, air or sea, is fuelled by oil. Ninety-five per cent of all goods in shops involve the use of oil. Ninety-five per cent of all our food products require oil use. Just to farm a single cow and deliver it to market requires six barrels of oil, enough to drive a car from New York to Los Angeles.

This half-century of deepening oil dependency would be difficult to understand even if oil were known to be in endless supply. But what makes the depth of the current global addiction especially bewildering is that, for the entire time we have been sliding into the trap, we have known that oil is in fact in limited supply. At current rates of use, the global tank is going to run too low to fuel the growing demand sooner rather than later this century. This is not a controversial statement. It is just a question of when.

(...)

Our society is in a state of collective denial that has no precedent in history, in terms of its scale and implications.

As the author presents in detail in the article, peak oil, in the best case, is a matter of decades instead of years. which means that, in view of the magnitude of the changes that will be required from us to keep on enjoying the standards of living we have in the West, we should start thinking about it, and planning for it now, even if the most optimistic scenarios for oil play out.

But we aren't.

When I and some of the oil-supply whistleblowers addressed a conference on oil depletion in the formerly oil-rich nation known as Scotland last year, five leaders of the British National Party sat in the audience. They said nothing. They just listened, and learnt, and no doubt reflected that the far right does well in tough times.

The BNP is Britain's hard right party, somewhat equivalent to Le Pen's National Front. Why on earth are they the only political party to care about this issue? Doesn't that tell us everything we need to know?

So here are the facts, again:

Only around 50 super-giant oilfields have ever been found, and the most recent, in 2000, was the first in 25 years: the problematically acidic 9-12 billion barrel Kashagan field in Kazakhstan.

Let us reduce our scale of scrutiny from the super-giant to the merely giant. Half the world's oil lies in its 100 largest fields, and all of these hold 2 billion barrels or more, and almost all of them were discovered more than a quarter of a century ago. Consider the recent record of discoveries of giant oil- and gas-fields of over 500 million barrels of oil or oil equivalent. Half a billion barrels - the definition of a "giant" field - sounds a lot. But since the world is eating up more than 80 million barrels of oil a day at the moment, it is in fact less than a week's global supply. In 2000 there were 16 discoveries of 500 million barrels of oil equivalent or bigger. In 2001 there were nine. In 2002 there were just two. In 2003 there were none.

We are simply NOT FINDING OIL ANYMORE. Furthermore, it's highly likely that the reserves we are counting on in the Middle East are exaggerated:

Dr Mamdouh Salameh, a consultant on oil to the World Bank, agrees there is a 300-billion-barrel exaggeration in Opec's reserves. More recently, a former director of Aramco has said that Saudi Arabia's proved developed reserves stand at 130 billion barrels. An anonymous informer talking to Dr Colin Campbell of the Association for the Study of Peak Oil goes further. His conclusion is that Saudi Arabia would have gone over its peak of production in the last quarter of 2004. This person speaks with front-line inside knowledge. "Saudi has at various times put 19 fields into production," he says. "Of these, eight are 'stars', being highly productive fields that produce around 90 per cent of the country's production. All the others are 'dogs' that have never worked well and probably never will. Recovery rates of up to 50 per cent may be appropriate for the 'stars'. For the 'dogs', 10, 15 or 20 per cent would be more appropriate. Make this adjustment and Saudi has depleted more than 50 per cent of its realistically recoverable reserves."

Leggett has a detailed description of the small print in BP's statistical survey of oil, published yearly, used the world over as the bible for oil numbers, and which points out that BP has, in fact, no idea if the numbers are right or not. And he reminds us of how OPEC members artificially inflated their reserve numbers in the 1980s to boost their quotas, as visible in this graph from the Oil Drum:

With Saudia Arabia producing 3 billion barrels per year, and Kuwait 1 billion per year, you'd expect the numbers to drift down, with ocxcasional bumps upwards as new fields are discovered. Nope, the numbers are absolutely flat, and thus very obviously false. But nobody amongst governments or oil companies ever discusses it...

country after country follows a crude bell curve - like Hubbert's curve - in both discovery and production. Today, more than 60 out of the 65 countries possessing oil have passed their discovery topping points and 49 of them have passed their production topping points. The US has a particularly long gap between the two: 40 years (1930 to 1970). The UK has one of the shortest: 25 years (1974 to 1999). This is because the first discoveries were made much later in the UK, when technology for both exploration and production were more advanced. Growing supplies of British oil didn't last long, though. Britain is now a net oil importer just like the US.

Nor is there any comfort to be derived from gas. Gasfields deplete very differently from oilfields, gas being much more mobile than oil. It is normal for a gasfield to yield 70-80 per cent of its gas over its production lifetime, whereas an oilfield will typically yield only 35-40 per cent of its oil. Drillers normally set gas production far below the natural production capacity so as to give a long production plateau. But the danger in this is that the end of the production plateau comes abruptly, and without market signals.

(See this earlier diary on natural gas depletion)

So are we doing anything about it?

We are trying to do something here on the internets:

A proposal for a serious energy policy
Building together an effective Dem energy policy (I)
Reenergize America – A Democratic Blueprint (Second Draft)
Energize America—A Democratic Blueprint (Third Draft)
Energize America - A Blueprint for U.S. Energy Security (Fourth Draft)

But in the real world?

The nation that gave the world such landmarks in the annals of democracy as the Marshall Plan is forced by deepening oil dependency into a foreign-policy maze that involves arming some despotic regimes, bombing others, and scrabbling for reasons to make the whole construct hang together.

(...)

The geopolitics of American oil dependency is well summarised by Michael Klare in his recent Blood and Oil. He sees four key trends in US energy behaviour: more imports, increasingly unstable and unfriendly suppliers, escalating risk of anti-American violence and rising competition for diminishing supplies. (...) The point here is that the US can have relationships with governments in unstable countries if it chooses the path of oil dependency, but not easily with their populations.

For the time being, our governments, led by the Cheney clique, seem to be only focusing on grabbing whatever oil's still around, by means which are increasingly at odds with our supposed values, and without any care given to anything beyond the very near future. This is setting the stage for large scale confrontation with other nations like China, India and even Russia which face the exact same problem. Simply put, there soon won't be enough oil around for all.

Chris Skrebowski believes that, from as early as 2007, the volumes of new oil production are likely to fall short of the combined need to replace lost capacity from depleting older fields and to satisfy continued growth in demand. In fact, given the time frames with which offshore oilfields are developed and depleted, it seems certain that there will be nowhere near enough oil to meet the combined forces of depletion and demand between 2008 and 2012. If there were, it would be from projects we would know about today (oil companies liking as they do to boast to their shareholders about every sizeable discovery). Given the inevitable time-lag from discovery to production, there is now no way to plug that gap.

"The perception of looming decline may be worse than the decline itself," Campbell said. "There will be panic. The market overreacts to even small imbalances. Prices are set to soar in the absence of spare capacity until demand is cut by recessions. We will enter a volatile epoch of price shocks and recessions in increasingly vicious circles. A stock-market crash is inevitable."

"If the economic recovery continues," Skrebowski added, "supply will get very tight from 2008 or 2009. Prices will soar. There is very little time and lots of heads are in the sand."

(...)

Early-topper arguments are not on the radar screens of the oil traders and analysts, as things stand. Should that happen, and should the mood of the packs on the trading floors flip to the view that we live no longer in a world of growing supplies of oil, but rather shrinking ones, the price will soar north of $100 a barrel very quickly.

An investor friend of mine has already concluded that this scenario is inevitable. He has switched his investment portfolio to anticipate the moment of "market realisation". This peak panic point, as he calls it, will not be limited to oil traders. The worlds of economics and business routinely assume a future in which oil is in growing and cheap supply.

That last point is a key. We routinely (and blithely) assume that oil will be there. When you buy a plane, when you build a house in a faraway suburb, when you move a factory to China, you are implicitly or explicitly betting on oil prices staying at levels similar to what they are now, i.e. compatible with growth in air travel, two-hour commutes or very long logistical lines. These are 3 pretty obvious examples, but most economic activities require similar assumptions.

Thus the question is: are those in power aware of these assumptions, and worried about the panic and crash should such information become widely available, or are they just clueless?

I'm still betting on the second option. There's just too much ignorance displayed by officials, even when they talk about the topic (for instance, the head of the French public agency for energy efficiency saying that we will soon reach the point when "we consume more oil than we discover"), and too little anticipation on the financial markets. The markets are currently betting on the not-so-low probability of a supply disruption from Iran (tensions), Nigeria (labor or ethnic trouble) or a few other places in a context of temporary tightness of the market (remember that CERA, the best-known consultancy in the business, confidently predicts a "sea of oil" in the second half of this decade).

As to politicians, they would be playing up the possibility of a conflict with Iran if they realised that it may send oil prices to $500 and not just $100 (should Iran reduce its oil production, or worse, "accidentally" close the Straits of Hormuz).

But we are living on borrowed time. In so many ways.

Display:
by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 09:17:32 AM EST
the head of the French public agency for energy efficiency saying that we will soon reach the point when "we consume more oil than we discover"
Wasn't that point reached in 1975?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 09:47:35 AM EST
I was amazed to see such blatant ignorance in the pages of Le Monde a couple of months back. It sounded very much like "we are slowly discovering the magnitude of the problem", the emphasis being on "slowly" rather than "magnitude"...

(btw, it was 1985)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 09:52:20 AM EST
[ Parent ]
Oh, yeah, I misread the graph. :-/

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 10:04:02 AM EST
[ Parent ]
It depends which data you use. Most people still don't use, on purpose or not, the reserve revision back dated at the time of the discovery, so living in the illusion of perpetual reserve growth.

by Hansvon on Tue Jan 24th, 2006 at 02:54:34 AM EST
[ Parent ]
The Independent has a distribution of about a quarter million daily (according to the UK National Readership Survey, its market share is about 1.4%) so I wonder what the impact of such a piece will be.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 10:02:49 AM EST
Hi jerome.

Love to have a discussion with you about that.
There is a small detail in  the article that I would like to mention. The author spends quite a lot of time explaining the problem of the production of oil, the fact that all the refiniries and all the new capacity is  not being built. He puts that as something horrible...

Well, I happen to believe that this is the key for a more or less smooth transition.

If no more refiniries are built the price of oil will increase sooner (maybe around five-ten years)  than because of a pure oil peak. In a way this is a vital bottle-neck for the transition.

In a way, oil prices will reach around 90$ somewhere within the next five years. Then, with a very little investment we will be able to reduce the demand by getting rid of the waste use (mainly stupid SUV cars and other excesses). So, these five-ten years will be our saviors because we will have a constant offer for a decade that will allow us to sustain the economy in the middle of the changes.

Beside that, I have been preparing a diary about the cruel number and frankly, the key variable is oil for the personal displacement with private cars... I will develop more on that in a future diary...so I am not scare since I have no doubt that eventually cars can be forbidden.

So, basically I think nothing will happen until oil does not hit the 90$ (100 $ if it is in a couple of years) no matter what we do..and then we will see a constant demand and offer of oil (at around 80 million barrels per day).

The world will wake up and the solutions will be there, just ready for the governemnt and the industries to implement: saving at home, solar at home and Wind, nuclear energy, tidal and probably coal if necessary, for the grid plus public transport some biofuels and a lillte bit of gas/oil and within 20 more years, more electricity to generate hydrogen.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 11:05:57 AM EST
This is correct, but the scary part for the short term is precisely the later part of the article when he shifts gears from oil reserves to oil production and establishes that even if there is as much oil as the optimists think, production will be outstripped by demand by 2012, and that there is very little that can be done about that. So, we have to brace ourselves for an interesting second decade of this Century.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 11:11:04 AM EST
[ Parent ]
Leggett suggests it'll be even before that.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 11:20:07 AM EST
[ Parent ]
I think that he suggests that a bootle-neck at 2007 will give a constant production of oil at least until 2012. My take is that it will be 2007-2017.. probably 2007-2020 if we stops at 70 million barrels a day.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 11:32:39 AM EST
[ Parent ]
Yes, but the problems is that demand will be growing in the meantime. China and India are at a point where car ownership is increasing a LOT faster than economic growth, so their demand for oil will increase even in an economic slowdown.

As we've seen in the past year, oil demand is very unelastic: prices have tripled, and yet demand has been growing at a record pace.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 11:53:46 AM EST
[ Parent ]
If oil hits a high 90-100$ there will be no apetite for cars. they can still develope a public transportation system. It will cost them as much as paying for the oil.

So China and India demand will probably grow but not as much as espected.

Regarding elasticity of oil. this is exactly my point, nothing is gonna happens until an inelastic break-down happens. So, the moment demand diminishes it will diminish a lot. Think about all the redundant demand in the US, or int he possibilities of India and China not to develope a huge private transport system...

It could go the other way and make China, Japan US and Europe  go through a huge recession.. but it can also be a mild recession or just a change in the priorities in the development of China and India, together with a reduction of the deman in US of around 30% and in Europe of around 10%.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 12:29:40 PM EST
[ Parent ]
But that's what we were saying for $50 dollar oil, and $60 oil, and demand growth did not even slow! Not only is demand not going down, but its rate of increase has not even gone down!

We'll need much more brutal prices changes to have an impact on oil consumption.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 02:54:52 PM EST
[ Parent ]
No if the demand is inelastic. It means that for certain prices there is almos no change in demand, or even increase, and then, suddenly, at a certain price the demands breaks down. Just as an inelastic material could do when a certain tension is applied.

I really hope that this will be the dynamics. But I could be wrong

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 03:25:45 PM EST
[ Parent ]
This is a great image... The oil market is strong but brittle.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 03:29:59 PM EST
[ Parent ]
True, but probably if oil hits 90-100$ in a rush in 2007 or because of a double jump (2006 and 2007), then we will probably have the period 2007-2011 to adapt. One part of the adaptation will be proably to secure the 80 million barrels a day necessary for ten more years.
So the transition should go between 2007-2020.

As you say it will be a really interesting decade. "A agarrarse los machos".

Again, I do NOT say that it WILL be smooth, but it certainly CAN be smooth. 10-15 years are enough for building wind power , nuclear , develope the solar at home, insolate houses, get rid of inefficient cars, improve efficiencies in the chemichal industry and use the first easy alternatives for oil in the production of plastic, construction of a complete public transport system, and a railway system for the movement of goods and commodities...

A real huge change....

Take the case of Spain for example. We will increase wind production more, keep the nuclears until we obtain 33 % gas/coal, 33% nuclear 33% wind+hydro. We will need to hurry up a little bit more than expected. We will really have to invest a lot on trains and generate a real spanish rail network. And eventually we will be able to reduce the oil consumption by 50% during this period with biofuels, more efficient cars , transport of goods by train even some gas-oil transformation...then we need the jump to hydrogen in the next two decades using wind solar hydro nuclear and coal to obtain it...so it can be even easy...but again it can also very messy.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sun Jan 22nd, 2006 at 11:30:05 AM EST
[ Parent ]
I wouldn't bet on the financial markets sleeping much longer.  The one great thing about the financial markets is that investors are betting with large sums of their own money, so the incentive to make smart predictions is there.  The markets are going to be the first signal to the politicians that we're headed for the wall.

The future is going to be very hard for people in suburban areas, as you've implied.  (Thankfully, I hate suburban and rural areas, so I'll stay near public transportation in the cities.)  That is, of course, depending on the state of renewable energy.  But I would look for increasing urbanization, if renewables move slowly, in the future.  That, however, could bring up the possibility of even more problems.

It's a bit frightening to hear of the BNP being at the event.  The far right does have a tendency to perform very well in elections during tough times.  It also has a nasty tendency to start wars.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jan 22nd, 2006 at 11:42:49 AM EST


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 11:51:53 AM EST
[ Parent ]
The suburbs are screwed, but I worry about access to ffod in urban areas, as it needs to be transported from the countryside. Also, we might se monocultures collapse as rural areas will need to diversify their output in order to be more self-sufficient.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 11:56:00 AM EST
[ Parent ]
Well, I don't know much about the structure of commodity market investment, but the evidence from other investment markets seems to somewhat contradict your thesis.

What I am saying:
The majority of investment is undertaken by people investing other people's money. Thus, their performance horizon is set by bonus schemes and the like and is on the order of 3 months to 1 year.

This pattern has so far held up very well in the oil market, where there is a lot of energy and analysis devoted to short term issues (c.f. Nigeria and Iran at the moment) and trying to judge the timing and length of these disruptions. Very little investment flow has been concerned with longer term issues, despite being pointed up by lots of sources.

by Metatone (metatone [a|t] gmail (dot) com) on Sun Jan 22nd, 2006 at 02:47:14 PM EST
[ Parent ]
I think investing for longer horizons involves rolling futures (replacing contracts with longer-dated ones as they expire) which is inherently risky and eventually unsustainable.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 03:32:22 PM EST
[ Parent ]
Has anyone, in this oil-price-countdown series, talked about Paul Roberts' book The End of Oil: On the Edge of a Perilous New World?  Because it's basically about exactly this.  We're running out of oil.

From the prologue:

I was standing on a sand dune in Saudi Arabia's "Empty Quarter," the vast, rust-red desert where one-quarter of the world's oil is found, when I lost my faith in the modern energy economy.  It was after sundown and the sky was dark blue and the sand still warm to the touch.  My Saudi hosts had just finished showing me around the colossal oil city they'd built atop an oil field called Shayba....

The illusion slipped.  On a whim, I asked my hosts about another, older oil field, some three hundred miles to the northwest, called Ghawar.  Ghawar is the largest field ever discovered.  Tapped by American engineers in 1953, its deep sandstone reservoirs at one time had held perhaps a seventh of the world's known oil reserves, and its wells produced six million barrels of oil a day -- or roughly one of every twelve barrels of crude consumed on earth.  In the iconography of oil, Ghawar is the eternal mother, the mythical giant that makes most other fields look puny and mortal.  My hosts smiled politely, yet looked faintly annoyed -- not, it seemed, because I ws asking inapproprate questions, but because, probably for the thousandth time, Ghawar had stolen the limelight....  [O]ne engineer boasted that Shayba was "self-pressurized" -- its subterranean reservoirs were under such great natural pressure that, once they were pierced by the drill, the oil simply flowed out like a black fountain.  "At Ghawar," he said, "they have to inject water into the field to force the oil out."  By contrast, he continued, Shayba's oil contained only trace amounts of water.  Ag Ghawar, the engineer said, the "water cut" was 30 percent.

The hairs on the back of my neck stood up.  Ghawar's water injections were hardly news, but a 30 percent water cut, if true, was startling.... Gwar wouldn't run dry overnight: depletion takes years and even decades; however, daily production would continue to fall steadily, and the Saudis would be forced to tap new fields, like Shayba, to maintain their status as the world's preeminent oil power....

To me, Ghawar is the perfect metaphor for what is happening to the larger engergy economy, a geologic cautionary tale for a complacent world accustomed to reliable infusions of cheap energy.

by the stormy present (stormypresent aaaaaaat gmail etc) on Sun Jan 22nd, 2006 at 02:05:41 PM EST
Sorry for all the typos.  I previewed it, but still didn't catch them all.  Not a genius with the keyboard, me.

Anyway, thanks to Jerome for this diary and the countdown series.  Sobering stuff.

by the stormy present (stormypresent aaaaaaat gmail etc) on Sun Jan 22nd, 2006 at 02:08:10 PM EST
[ Parent ]
I have not reviewed this book (I've heard of it), but you will find similar stuff on the Saudi fields in my countdown diary n°10, with the summary of an interview with Simmons. Sobering indeed.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Jan 22nd, 2006 at 02:57:37 PM EST
[ Parent ]
What are the geopolitical and macroeconomic implications for the oild producers of $200 oil at 80mbd? They're already raking in more cask than they know what to do with at about $60.

I keep asking the same question over and over again, but soes anyone know where I can get my hands on a relatively up-to-date Leontieff model?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 03:34:58 PM EST

With oil at those prices, I would expect high inflation.  In part we would see a start to an economic shakedown where practices that require lots of energy (shipping food long distances, for example) will simply no longer be viable.

When I saw Deffeyes speak, he kidded about learning to like to eat turnips and potatoes.

by ericy on Sun Jan 22nd, 2006 at 08:48:07 PM EST
[ Parent ]
I like turnips and radishes...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Jan 23rd, 2006 at 05:38:29 AM EST
[ Parent ]
To add to ericy's comment, this represents the kind of wealth transfer that we last saw in the colonial periods. So maybe that is the place to look for ideas of effects.
by Metatone (metatone [a|t] gmail (dot) com) on Mon Jan 23rd, 2006 at 04:32:17 AM EST
[ Parent ]
Perhaps this site has been mentioned before, but if not he wraps up all the discussions in one place:
Life After the Crash


Policies not Politics
---- Daily Landscape
by rdf (robert.feinman@gmail.com) on Sun Jan 22nd, 2006 at 05:02:37 PM EST
But since the world is eating up more than 80 million barrels of oil a day at the moment, it is in fact less than a week's global supply. In 2000 there were 16 discoveries of 500 million barrels of oil equivalent or bigger. In 2001 there were nine. In 2002 there were just two. In 2003 there were none.

Right about there the red alert sirens ought to start screaming.  In all of 2000 we found less than 16 weeks worth of new oil supplies.  In 2001 we found less than nine.  In 2002 we found less than two.  In 2003 we found none.  I know that's not an entirely accurate translation, but still...

Now where are we going and what's with the handbasket?

by budr on Sun Jan 22nd, 2006 at 06:43:13 PM EST
International Herald Tribune: Pipeline blasts cut Georgia gas supply (SUNDAY, JANUARY 22, 2006)
Explosions in southern Russia early Sunday severed the country's natural gas pipelines to Georgia, swiftly plunging Russia's neighbor into heat and electricity shortages and causing a sharp diplomatic flare-up between the two nations.

Two more explosions hours later severed one of Russia's main electricity cables to Georgia, increasing the electricity shortage even as the gas supply in Georgia dwindled.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Jan 22nd, 2006 at 06:46:42 PM EST
How sensitive to the price of oil are certain products we in Europe import from the other side of the world?

I'm not referring to high-tech products from China, I'm talking about bunches of flowers; fish; meat; fresh fruit and vegetables etc etc.

The margins on the products can't be very high. I suspect that there may be a shake up in this world trade over the next decade.

Eats cheroots and leaves.

by NeutralObserver on Sun Jan 22nd, 2006 at 08:35:35 PM EST
The Oil and Gas Journal publishes an annual report on global oil production, which has convenient sub totals for OPEC and FSU (former Soviet Union) production.  I took the total world production for each year and subtracted OPEC and FSU production to find the production from the Rest of the World (ROW).  That includes the western countries, China, Brazil, Angola, etc.  Here is what I found:

Year    World    OPEC    FSU    Rest of World
2000    67233    28100    7896    31237
2001    66746    27034    8421    31291
2002    65426    24462    9180    31784
2003    68507    26800    10114    31593
2004    71243    28746    10826    31671
2005    71793    29343    11278    31172   (estimates)

(Note that this is crude oil production, not total liquids.)

As you can see, ROW production dropped in 2005, after a plateau from 2002-2004.  Regardless of the actual physical peak of production, it looks like the political peak is very near, if not already past.  From here on out, OPEC and the FSU will be setting their own price.

Does anyone have earlier data?  It might be interesting.

by corncam on Mon Jan 23rd, 2006 at 05:38:43 PM EST
Thanks for the data.

  • Russia is plateauing, so FSU increases will mean essentially Azerbaijan and Kazakhstan.
  • OPEC countries always seem to be able to increase production when they've dropped it before, but they never go beyond the level. Never.

I have graphs and statistics from the most recent issue of Petroleum Economist, but cannot seem to access them in electronic form. It's nominally about required investments, and reserve replacement, but the conclusion is pretty much that they don't really see how production can increase much from current levels. It's scary, as they don't really emphasise it, but it comes through pretty starkly. Basically, they dutifully present the CERA or IEA numbers and show how absurd they are.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 23rd, 2006 at 05:59:48 PM EST
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