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Countdown to $100 oil (30) - senior politico fears looming oil wars

by Jerome a Paris Mon Sep 4th, 2006 at 08:05:15 AM EST

Michael Meacher, a grandee of the UK Labour party, and Tony Blair's environment minister from 1997 to 2003, has written a pretty explicit column in today's Financial Times:


Urgent action needed to avert looming oil wars

The world is consuming about 84m barrels a day, but because of increasing demand from accelerating economic growth in China, India and other countries, the US Energy Information Administration recently forecast demand at 121m barrels a day by 2025. Yet a near-50 per cent increase in demand cannot be met in 20 years. As the head of exploration at Total recently said: "Numbers like 120m barrels per day will never be reached, never." First, the oil is not there. For the past decade the world has used some 24bn barrels a year, but has found on average fewer than 10bn barrels of new oil annually. Second, even if it were available, the cost implications are prohibitive. The World Energy Outlook 2005 estimated investment of $17,000bn would be needed to bring the oil to consumers: half again more than US gross domestic product. Third, the infrastructure does not exist to deliver it without unmanageable price spikes. Global spare production and refining capacity is virtually gone.

Pretty blunt, and pretty clear, no?

We will not be able to provide enough oil for all the expected demand of the world in the very near future.



Already, production by non-Organisation of the Petroleum Exporting Countries is nearing its peak and subsequent decline. When, by 2010, it cannot meet incremental demand, Opec will become less able to accommodate short-term fluctuations. Volatile price hikes will be inevitable and demand growth will have to be curtailed.

He only writes about demand "growth" that needs to be curtailed, and not demand itself, so he is still being VERY optimistic, but at least he mentions the topic that I've been banging about incessantly: demand destruction.


There are only three ways out of this looming crisis. One is "demand destruction", which falling supply will to some extent enforce, but almost certainly too little, too late. A second route is to diversify out of fossil fuels and into renewable sources of energy and energy conservation. There are no signs that this is being pursued worldwide on the scale necessary. The third route, which is both short-sighted and counterproductive but the one being pursued at present, is to grab the lion's share of ever-dwindling oil repositories.

Either we start using energy less and/or smarter, or we go to war for it.

It could not be said any clearer.

And we are choosing war, currently.


This is a turning point in history. Never before has a resource as fundamental as oil faced rapid decline without a substitute in sight. The self-destructive strategy of cornering diminishing oil and gas supplies must urgently be switched to building a new world energy order based on a renewables and hydrogen economy, alongside energy conservation. If it is not, we risk a second Great Depression, rising military tensions and the prospect of big wars.


Great Depression


big wars

There. It is said, in black and white, by a senior politician (and a still active one, as he still is a Labour MP, although one mostly in opposition to Blair and thus powerless for now). Will anyone actually in power do anything but rush us headlong into that well identified nightmare?

We HAVE to tell our politicians to stop choosing war as an energy policy by default. We HAVE to stop complaining about high gas prices and change our ways.

Oh? And oil prices are below $70 again, so the topic is forgotten...

See how we've gotten used so quickly to $70 oil prices? Don't think it will be any different with $100 oil, or $200 oil. The more I think about it, the more I think that the only way we're actually going to change our behavior is with actual physical shortages.

I'm really hoping for the Day of the Oslo Warning.

Earlier "Countdown Diaries"
(links to both ET and DK when the versions are different enough):
Countdown to $100 oil (29) - Alaska joins axis of evil (unreliable oil suppliers)
Countdown to $100 oil (28) - New records suggest more to come
Countdown to $100 oil (27) - 'Mission Accomplished' - High oil prices are here to stay
Countdown to $100 oil (26) - Time to bet again (eurotrib)
Countdown to $100 oil (26) - Time to bet again (dKos)
Countdown to $100 oil (25) - Iran vows that oil prices will not go down
Countdown to $100 oil (24) - What markets are telling us about future energy prices
Countdown to $100 oil (23) - Running out of natural gas in North America
Countdown to 100$ oil (22) - gas shortages in the UK - 240$/boe
Countdown to 100$ oil (21bis) - long term vs short term worries (dKos)
Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'
Countdown to 100$ oil (20) - Meteor Blades is Da Man in 2005
Countdown to 100$ oil (19) - Your bets for 2006 (Eurotrib)
Countdown to 100$ oil (19) - Your bets for 2006 (DailyKos)
Countdown to 100$ oil (18) - OPEC happy with oil above 50$
Countdown to 100$ oil (17) - Does it matter politically? A naked appeal for your support
Countdown to 100$ oil (16) - We'll know on Monday
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets (eurotrib)
Countdown to 100$ oil (9) - I am taking bets (dKos)
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1) (eurotrib)
Countdown to 100$ oil (1) (dKos)

Display:
and link to crosspost on dKos: http://www.dailykos.com/story/2006/9/4/81822/48748

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Sep 4th, 2006 at 08:20:59 AM EST
I am going to a lecture by ASPO chairman Kjell Aleklett tonight. I'll ask him what he thinks of Great Depression and big wars.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Sep 4th, 2006 at 09:03:10 AM EST
[ Parent ]
Well, that was interesting. On the subject of Great Depression big wars thing, well, if no one does anything about things right now...

Some other interesting things. According to people who should know what they are talking about, Saudi capacity should be able to reach 11,5-12 mbd and stay there for quite a while. A few decades, 30 years maybe. Not that it matters much as we'll need to find and produce another 10 Saudi Arabias in 2025 if the IEA people are going to get all the oil they want. Except that maintaining the house of Saud will be increasingly important. But you already knew that.

And the other very interesting little bit of information I can't tell you, but I can give you a clue: http://www.eurotrib.com/story/2006/6/22/192723/959
Just change places between the E and the I.

And I recruited myself to his campaign to be elected to parliament.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Sep 4th, 2006 at 03:35:59 PM EST
[ Parent ]
On the subject of Great Depression  big wars thing, well, if no one does anything about things right now...

And how long of a window of opportunity is "right now", exactly?

What does it take to get elected to parliament in Sweden? Is he trying to get a party nomination? Run as an independent? Register ASPO as a political party?

Nothing is 'mere'. — Richard P. Feynman

by Migeru (migeru at eurotrib dot com) on Mon Sep 4th, 2006 at 03:46:30 PM EST
[ Parent ]
No, he is running as a candidate for the Liberal People's Party, a center-right party. He already has party nomination. He is number six on the Uppsala liberal party list. But only number one and maybe number two will get into parliament.

But!

It is possible to get elected anyway if something like 2000-2500 people who live in Uppsala and vote for the liberals marks his name on their voting card. The Liberal party got a record 20.000 votes in the 2002 election in Uppsala, 18,6 % of the total. This was because they stole lots of votes from the Moderate party (liberal-conservative). The Moderates are sure to regain many of those votes, and the liberals will get maybe 10.000-15.000 votes in Uppsala. And Kjell need something like 2000-2500 of those.

http://folkpartiet.se/FPTemplates/PersonalPage____45511.aspx

This is what Swedish voting cards (or what is it called in English?) look like, though it is from 2002, from another city and another party, and for the kommun ("county"), not for parliament:

It's pretty unlikely he gets into parliament as he doesn't have enough time to run a campaign - he is constantly travelling and lecturing abroad when he isn't swamped by calls from top corporate CEO's and high ranking international energy officials. It seems the entire Swedish corporate world is peak oil aware because of his work.

By the way, he told me a funny thing. When ASPO was formed, there was no such thing as "peak oil". It was called "oil peak". But ASOP didn't sound right so they called it ASPO and peak oil. And since then that has been what is has been called.

And it's on the BBC today: http://news.bbc.co.uk/2/hi/business/5305950.stm

And in BBC radio as well. Kjell said he was part of that program, right in the end.
http://www.bbc.co.uk/radio4/drivenbyoil/

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Sep 4th, 2006 at 04:48:39 PM EST
[ Parent ]
And election is September 17, in two weeks.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Sep 4th, 2006 at 04:49:27 PM EST
[ Parent ]
It will be shortages that matter. People just adjust their lifestyle gradually as fuel prices go up.

Of course the poor will be impacted hardest first, probably starting this winter in the US & UK. But until the middle classes are hit hard nothing much will change.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Sep 4th, 2006 at 09:11:44 AM EST
I have always thought that if there is no Iran war, the transition will be smooth with some elasticity in the demand when oil reaches around 90$ (present dollars) per barrel and then some more elasticity at 100$ for the physchological effect. So the wars are more geopolitical than energetic (although the energy factor is very very important)

You may wonder why 90$?

Jerome.. check the level of gas consumption in Europe as a function of price and compare it with the US without taxes. US should have a similar transition in relative terms (percentages) oif oil consumption as Europe when gas prices increase and reach the actual European level..diminishing miles driven and better mileage of new cars will follow in the US...At 90$ we should have around 4-5 $ dollars a galon in the US which will have a similar stagantion in gas consumption for transport as the one that Europe has now (at least in Spain the last two years)...and US transport consumes around 15 million barrels per day..a ten percent reduction is 1.5 million barrels per day...(a 20% per cent reduction can be expected at 100$-120$ with 5$-6$ a galon) just enough to offset other increases in the world for the next couple of years and keep the price around 90$-110$.

My forecast
2006 below 90 $
2007 close to 90$ but still below
2008 reach 90$ close to 100$ (we could reach 100$ here)
2009-2010 oil around 100$
2011-2012 stable around 100$
2013-2017 ...ready for the complete energy transition in transport????

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 Mon Sep 4th, 2006 at 09:47:24 AM EST
The main reason consumption has been down in Europe in recent years has been thanks to the rollout of the new generation of diesel engines, which have allowed average fleet consumption to go down as a massive shift from petrol to diesel took place. This can only happen once.

Price increases have a much bigger impact in the US where they are not cushioned by the high level of tax (gas going from $2 to $3 is more painful than it going from $6 to $7) - and yet consumption is still increasing over there.

Much higher prices will be needed to actual get demand destruction, either from the poorest countries, or from the poorest in the West, at a time when demand is skyrocketing in emerging Asian economies and in subsidised petro-economies.

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

by Jerome a Paris (etg@eurotrib.com) on Mon Sep 4th, 2006 at 10:58:47 AM EST
[ Parent ]
I can't find summary statistics on fossil fuels (non renewable oil, coal, ...) per country/year/usage (transportation, industry, heating...), do you have a link handy?

Also I've been surprised by wikipedia on enery storage, in particular by the claim that flywheels could store 130 Wh/kg and release at 90% efficiency. 1 cubic meter of water elevated 100 meters = 0.272 kWh. There's a collection of Fuel Cells described too.

My home consumption over the past 8 years has been on average 470 W, so 12 kWh per day, in other quantities a day of my electricity consumption is :


  • around 100 kg of flywheel or Zinc-air battery or Molten-carbonate German unit

  • 45 cube meters of water 100 meter high

  • 12 liters of methanol (and 30cmx30cmx30cm holding 5000 Toshiba batteries, don't show me the price :)

The last one is interesting. Any good source on price and Wh per kg of various energy storage facilities?

by Laurent GUERBY on Mon Sep 4th, 2006 at 05:06:58 PM EST
[ Parent ]
I can't find summary statistics on fossil fuels (non renewable oil, coal, ...) per country/year/usage (transportation, industry, heating...), do you have a link handy?

The US Energy Information Agency has a large amount of information. The specific country info is updated on an irregular basis so you'll get anything from very up to date figures to ones several years out of date, the amount and type of detail also varies pretty widely. Run your mouse over the map, you'll get drop down menus, click, and keep on clicking for details.

by MarekNYC on Mon Sep 4th, 2006 at 05:13:43 PM EST
[ Parent ]

from here where expected 2025 numbers can be found as well.

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

by Jerome a Paris (etg@eurotrib.com) on Mon Sep 4th, 2006 at 05:20:03 PM EST
[ Parent ]
I liked some of the latest piece by the Skepical optimist:


But I think way too many people (including libertarians, Republicans, and Democrats) categorize too much government spending as burning-the-money.  Well, to put it mildly: I disagree with that.  I am far less concerned with the money than I am with what we get for the money: if it's a bad investment, we should refuse to spend any money on it--neither taxpayer money, nor borrowed money; if, however, it's a good investment that falls into one of the green smiley-face boxes above, we should spend the money without hesitation, regardless of whether we finance that spending by taxing money from ourselves or by borrowing it from willing lenders.  I've said that a hundred times before, and I'll keep saying it again and again.

Looks like the debat2007 folks should read this guy blog more often.

Measuring gov debt without private and corporate debt and without measuring what we get for the government debt is idiotic.

May be we need to spread the word in France ...

by Laurent GUERBY on Mon Sep 4th, 2006 at 06:18:51 PM EST
[ Parent ]
Flywheels.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Sep 4th, 2006 at 05:50:10 PM EST
[ Parent ]
Many thanks for the link!

The BHE6 is about 7 Wh/kg (810 kg for 6 kWh) though. The 25 kWh model is at 17 Wh/kg (1429 kg). The matrix is a bit less efficient on this measure at 14 Wh/kg.

We're far from wikipedia claim here.

by Laurent GUERBY on Mon Sep 4th, 2006 at 06:31:06 PM EST
[ Parent ]
Do not forget the impact of eliminating SUV from the US middle-class (and highways)..much higher impact than diesel in Europe. It will not affect the demand of the poorer..they they do not have a SUV to start with.

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 Mon Sep 4th, 2006 at 03:01:20 PM EST
Fully agree - but it has NOT happened yet!

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Sep 4th, 2006 at 04:42:17 PM EST
[ Parent ]
Perhaps you have not looked at the recent sales numbers. The SUV craze is dead, or close to it.
by asdf on Mon Sep 4th, 2006 at 09:49:30 PM EST
[ Parent ]
You have crossovers now.

But more seriously, so long as a V6 3.0l engine ie not reserved for only the biggest most luxurious cars, it doesn't matter what you call the cars, they will be car hogs. In Europe, a Camry is amongst the biggest cars around.

In fact, gas consumption is still showing increases yoy.

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

by Jerome a Paris (etg@eurotrib.com) on Tue Sep 5th, 2006 at 01:37:26 AM EST
[ Parent ]
Absent military conflict in the AG that shuts down a major supplier, I'm predicting we have about 75 countdown diaries before we hit $100 oil.  Guessing 2009ish based on 25/year on the diaries (and no cheating Jerome).

No one truly expects we'll find a way to produce 120 MMBD of crude oil.  Numbers in that range were bandied about in 1980 for roughly now.  The oilco answer was shale, coal liquifaction, biomass and other alternatives.  They were drilling like hell too but they gave us hundreds of millions to spend investigating alternatives.  Of course the real savior was price shock induced recession.

my gut says we have a recession in the USA next year.  If that triggers a recession in China, we could have an economic meltdown over there similar to the big pukeout in the early/mid 90's.  that will be brutal for the supply/demand balance on oil.  I also believe China will hit a wall pretty soon.  They've saturated the US and Western Europe with cheap goods and only put roughly 20% of their population to work in the modern world.  They're destroying their environment.  Can they really double their GDP/oil use again in the next 10 years?  Ditto India.  How long can we afford to buy their junk?  Or perhaps how long will they trade their goods for our junk paper promises?

At some point Bushco will give in to a partition of Iraq.  Oil production will rapidly rise thereafter as they will need the cash to put that place back together.  Instead of a strong member of OPEC, they'll be Nigeria.  Pedal to the metal on production.  There are plenty of Russians, Chinese and others who will rush in there to drill/repair.

Global warming may well shave demand off the winter heating peaks.  Look how hard natgas fell last year after a mild winter.  $15--->$6.  or in oil equivalent, $90-->$36.  That could ding oil this year if we've no hurricane screwing up production.  Stocks are highish.

Supply side is growing as well.  We're holding at 84 MMBD with Venz down 1 on labor strife, Nigeria down 1 on turmoil.  Iraq down 1-2 on war.  Saudis have a little spare.  

If the consumer gets lucky, we could have a +3-5 MMBD increase in supply and a -5 MMBD demand situation.  Oil will puke,  but not for a generation this time.  We'll have a 3-5 year respite.  

So that's the bear case.  probably equally slanted to your bull case.

Even if I'm wrong and none of the bear possibilities arise, at some price, and maybe $100 is what it will take, we'll cut US demand as govt requires 40 MPG as a fleetwide average.  That knocks off 5 MMBD of mogas demand in the USA.  Your windmills will free up natgas for other uses as well.  I just don't see the world in flames over oil.  Mainly because the war will dry up the oil while driving demand through the roof.  One Pakistani nuke on Ras Tanura and the war becomes an exercise in Bush logic.

by HiD on Tue Sep 5th, 2006 at 06:20:04 AM EST
Thanks for making an excellent, and compelling, case. But why do you call that being "pessimist"? Interesting choice of words...

I promise I won't cheat on the number of diaries!

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

by Jerome a Paris (etg@eurotrib.com) on Tue Sep 5th, 2006 at 08:33:28 AM EST
[ Parent ]
Pessimistic on price.  Most of the world likes it cheap....  
by HiD on Wed Sep 6th, 2006 at 05:27:05 AM EST
[ Parent ]


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