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It’s Not Your Mother’s Energy Crisis
Oil peaking represents a liquid fuels problem, not an “energy crisis” in the sense that term has often been used. Motor vehicles, aircraft, trains, and ships simply have no ready alternative to liquid fuels, certainly not for the existing capital stock, which have very long lifetimes. Non-hydrocarbonbased energy sources, such as renewables and nuclear power, produce electricity, not liquid fuels, so their widespread use in transportation is at best many decades in the future. Accordingly, mitigation of declining world conventional oil production must be narrowly focused in the near-term.
It is possible that peaking may not occur for a decade or more, but it is also possible that peaking may be occurring right now. We will not know for certain until after the fact. The world is thus faced with a daunting risk management problem. On the one hand, if peaking is decades away, massive mitigation initiated soon would be premature. On the other hand, if peaking is imminent, failure to quickly initiate mitigation will impose large nearterm economic and social costs on the world. The two risks are asymmetric:
• Mitigation initiated prematurely would result in a relatively modest misallocation of resources.
• Failure to initiate timely mitigation with an appropriate lead-time is certain to result in very severe economic consequences.
The world has never confronted a problem like this. Risk minimization requires the implementation of mitigation measures well prior to peaking. Since it is uncertain when peaking will occur, the challenge for decisionmakers is indeed vexing. Mustering support for an invisible disaster is much more difficult than for one that is obvious to all.
Over the past century, world economic development has been fundamentally shaped by the availability of abundant, low-cost oil. Previous energy transitions (wood to coal, coal to oil, etc.) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.
The world has never faced a problem like this. Without massive mitigation at least a decade before the fact, the problem will be pervasive and long lasting. Oil peaking represents a liquid fuels problem, not an “energy crisis” in the sense that term has been used. Accordingly, mitigation of declining world oil production must be narrowly focused, at least in the near-term.
A number of technologies are currently available for immediate implementation once there is the requisite determination to act. Governments worldwide will have to take the initiative on a timely basis, and it may already be too late to avoid considerable discomfort or worse. Countries that dawdle will suffer from lost opportunities, because in every crisis, there are always opportunities for those that act decisively.
About the Author Robert L. Hirsch is a Senior Energy Program Advisor for SAIC. Previous employment included executive positions at the U.S. Atomic Energy Commission, the U.S. Energy Research and Development Administration, Exxon, ARCO, EPRI, and Advance Power Technologies, Inc. Dr. Hirsch is past chairman of the Board on Energy and Environmental Systems at the National Academies. He has a Ph.D. in engineering and physics from the University of Illinois.
(October 2005 issue)
The original article is ten pages long with graphs and tables. The Atlantic Council which published this article "promotes constructive U.S. leadership and engagement in international affairs based on the central role of the Atlantic community in meeting the international challenges of the 21st century." (mission; history.) Article recommended by "irishhistory".
Robert L. Hirsch is project leader for the "Hirsch report" prepared for the US government. Energy Bulletin has excerpts here and here. Also see Where is the Hirsch Report?. Reader DE has recently located the Hirsch Report on a Dept of Energy website (here - 319-KB PDF).
The Peak Oil Crisis:
When Will Peak Oil Arrive?
Tom Whipple, Fall Church News-Press
Nearly anyone who studies our world oil supply knows that someday production will peak and start its inexorable course downward. Moreover, everybody knows there are many events — hurricanes, wars, terrorism, regime changes, and proliferation squabbles to name a few — that could cause such a large and prolonged downturn in a country's or region's oil. By the time the cause of the interruption is remedied, the rest of the world's oil producing countries would be so far down the depletion curve, resumed production would not matter.
Thus, the issue comes down to one of a.) peak oil coming "naturally" as a result of the simple inability of the world's oil producers to continue to supply an increasing amount of oil, or b.) some outside force stopping a significant amount of production.
...Last week, however, the Association for the Study of Peak Oil (ASPO), the oldest and most prestigious of the unbiased organizations studying peak oil, released a new estimate of the year in which peak oil will arrive. The new date, which is based on a reevaluation of the potential for further deepwater oil production, is now 2010 vs. the previous estimate of 2007. It should be noted that a few years back the ASPO moved the date back from 2010 to 2007 based on turmoil in the Middle East .
Until now, most independent observers have concluded that world oil production would peak within the next two or three years. We now have an authoritative estimate, which pushes the date to five years.
To get a better grip on this issue, let's reflect for a moment the variables going into determining the year oil will peak.
(13-19 October 2005)
The Oil Bubble
Seventy dollars a barrel? Relax, it'll come down
Wall Street Journal
We keep hearing the word "bubble" to describe industries with rapid and unsustainable rising prices. Hence, the Internet bubble, the telecom bubble, stock market bubble, and now, some analysts believe, a housing bubble. Yet for some mysterious reason no one speaks of the oil bubble--though prices have tripled in two years to as high as $70 a barrel.
Reviewing the history of oil-market boom and bust confirms that we are in the midst of a classic oil bubble and that prices will eventually fall, perhaps dramatically. Despite apocalyptic warnings, the world is not running out of oil and the pumps are not going to run dry in our lifetimes--or ever. What's more, the mechanism that will surely prevent any long-term catastrophic shortages in energy is precisely the free-market incentive to make profits that many politicians in Washington seem to regard as an evil pursuit and wish to short circuit.
The best evidence for an oil bubble comes from the lessons of America's last six energy crises, dating back to the late 19th century, when there was a great scare about the industrial age grinding to a halt because of impending shortages of coal. (Today coal is superabundant, with about 500 years of supply.) Each one of these crises has run almost an identical course.
(8 October 2005)
Mentioned by MOBJECTIVIST. It's disturbing that all of the WSJ's arguments are economic -- that there's no discussion of geological limits. As some other commentators have said: the boom/bust oil cycle will continue... until it doesn't. (The Wall Street Journal has two different personalities: the journalists who write the news stories and are widely respected; and the editorial writers who are extremely conservative.) -BA
A proposal for a serious energy policy
Jerome a Paris, Daily Kos
...The goals must be as follows:
* we must focus on demand reduction. any energy policy focusing only on providing new supplies (even of the renewable kind) will only lead to protecting the status quo;
* we must focus on diversity: there is no single miracle solution. We need all options and partial solutions to be used, both on the supply and the demand side of the equation. Diversity means also fewer risks of disruption and fits in the narrative of energy security;
* indeed, an energy policy is an essential part of a security policy; security from want and security from abject entanglements in unpleasant areas of the world;
* finally, a smart energy policy is an investment in the future, for a cleaner world, a safer world where our children work in local, high tech, jobs in a preserved environment.
With that in mind, here are some more concrete proposals:
* conservation must become the new mantra and must be encouraged and incentivised. This will come from regulation (tougher CAFE standards, new building codes making it compulsory to use energy saving techniques in construction) and from targeted tax policies (subsidise local power production with solar panels and the like, tax gas guzzlers). Meteor Blades has long written about this and I explicitly put it as the first point here. Conservation saves money.
* environmental rules should not be relaxed, quite the opposite, they should be tightened. Weak environmental rules and lack of planning for the future is what is killing us (link it to Katrina, it's easy enough and true enough). Carbon emission quotas should be set - this will make the coal industry (which would otherwise make a killing form the higher prices) really improve its lot or pay for the renewable investments...
* a massive public investment programme in renewable energy - starting with wind, which is already cheaper than gas-fired power, but focusing also on R&D for future sources like solar or tidal. ....
(12 September 2005)
An analysis of peak oil by one of the premier writers at the liberal Democrat blog, Daily Kos. The analysis ends with an outline for an energy program. Although the proposal is addressed to Democrats, there are plenty of good ideas for Greens and Republicans to pick from. The original article has many comments. Later in September, Jerome made a related post: Building together an effective Dem energy policy. Both articles are mentioned in The Oil Drum's survey of political blogs that have written about Peak Oil. -BA
What Me Worry?
Japan Blithely Ignores the Warnings of Peak Oil Analysts
Andrew DeWit, Japan Focus
The October 2 edition of the Nikkei, Japan's leading business newspaper, carried a review, by Tokyo University Professor Kikkawa Takeo, of two recently translated books that discuss peak oil. As most readers will know, peak oil is the theory that the global supply of oil is about to peak in production and then irrevocably decline, leading to enormous challenges for our oil-dependent societies. The books the Nikkei decided to review are Paul Robert's "The End of Oil," and Linda McQuaig's "It's the Crude, Dude: War, Big Oil, and the Fight for the Planet" (the latter misleadingly titled "Peak Oil" in Japanese). The Nikkei gives peak oil theory gets a thumbs down. The review approvingly cites a 2005 Nikkei publication "Reading Oil" (Sekiyu wo Yomu), which argues that technology and new investment will increase oil reserve recovery rates and ensure new finds. And to cap the rebuttal, an appeal to authority: an article in the May 2005 edition of the Japanese Oil and Natural Gas Review that essentially dismisses peak oil theory.
On the other hand, as we can see with the Japanese translation of McQuaig's book getting the "Peak Oil" title, there is increasing interest in the subject in Japan. The Nikkei editors, having studiously ignored peak oil until now, decided that it was necessary to carry something soothing about it. So the review concedes that peak oil theory as a social phenomenon deserves attention. The author, Kikkawa, remarks that Japan is just behind America and China in its consumption of oil, but that in contrast to them it has a weak level of concern for energy security. The campaign leading up to the September 11 election in fact was notable for the virtual absence of comment in the contending parties' platforms. Keep in mind that Japan essentially has no domestic reserves of oil and gas, and relies on America to protect the sea lanes from the Middle East (from whence Japan gets about 85% of its oil).
Andrew DeWit is Associate Professor of Economics at Rikkyo University in Tokyo and a Japan Focus coordinator. He wrote this for Japan Focus, developing an earlier analysis that appeared in Shukan Kinyobi. The author can be contacted at dewit@rikkyo.
(12 October 2005)
This article is also posted at Znet. A previous article on the subject by Andrew DeWit appeared in Japan Focus: Peak Oil and Japan's Food Dependence.
Reports on End of Oil conference (London Oct 11)
The main conference was well run, Iain Gibson was a jovial and irreverant MC but most Peakniks had heard most of the speakers thoughts and information before. There were however a lot of business people, NGO representatives, academics, etc which was heartening to see. The food was good too!
Several reports from peakniks attending the recent End of Oil conference in London. More reports are on peakoil-dot-com.
Malta: Fuel cost 'options'
Social partners 'in shock'
Herman Grech, Times of Malta
As oil prices soar, social partners have warned that the government's proposed price hikes would be a huge setback to the country's competitiveness and possibly fuel unemployment.
The Chamber of Small Business Enterprises, GRTU said transporters were prepared to take drastic action as Malta braces itself for "one of its biggest ever blows". It declined to give further details.
Most of the constituted bodies were yesterday engaged in internal meetings to try and counter the government's proposals to mitigate the explosion in oil prices.
Enemalta's cost of fuel shot up from Lm18.7 million in 1999 to Lm54.5 million last year and is expected to rise to Lm84 million in 2005/2006. The government is contemplating a massive increase the water and electricity surcharge, raising it to 102 per cent from the present 17 per cent, or putting fuel prices up by 20c per litre.
...[Malta Employers' Association director general Joe Farrugia] said that where fuel is concerned, Malta is more vulnerable than other countries, since even the water supply depends on energy generation. The country has also been lagging behind in tapping alternative energy sources.
..."Too many things are happening at once. The ultimate solution remains in seeking ways to increase production. It is only through increased national output and productivity that the economy would really be in a position to bear the brunt of such shocks."
He warned that if rising costs of production, combined with a fall in consumption result in a significant drop in profitability, then unemployment is likely to follow.
Union Haddiema Maghqudin general secretary Gejtu Vella said the proposed revisions would harm competitiveness, erode workers' conditions and hurt pensioners.
"Having said that, the social partners are now faced with this fact. This is not our own doing and let's stop pointing fingers at each other. The social partners therefore need to come out with a national agreement," Mr Vella said.
(15 October 2005)
Recommended by "smiffy" at peakoil-dot-com.
Chavez: world faces major energy crisis
Ciaran Giles, Associate Press via Yahoo!News
SALAMANCA, Spain - Venezuelan President Hugo Chavez said Saturday that the world faces an energy crisis but there is little chance of his country and other
OPEC members increasing production because they are already pumping near "their capacity."
"The world will have to get used to a barrel price, I think, of above $50, and energy will have to be saved," he told reporters as leaders from Spanish- and Portuguese-speaking countries met in this central Spanish town.
..."We're at the doorway of major energy crisis worldwide," Chavez said. "We'll have to develop other resources such as wind, solar and nuclear energy — naturally for peaceful purposes." He said Venezuela was in talks with Argentina and Brazil regarding nuclear power.
"Prices will continue to rise but oil is running out," he said
(15 October 2005)
Americans expect 'miracle' oil reserves
Michael S. Abraham, Roanoke Times
T. S. Eliot once said, "Humankind cannot stand too much reality."
Parade magazine embodies this philosophy to the hilt in, "Oil, Energy at What Cost."
Parade has always been to journalism what bacon-cheeseburgers have been to nutrition. The overall tenor, "don't worry too much," fits with its perpetual rose-colored look on the world. But this article is so full of factual inaccuracies and obfuscations it renders itself worthless, doing more harm than good.
Few scientific or political arguments are irrefutable, but here's one: Oil is a finite resource. We began marching toward its extraction peak with the consumption of the first barrel.
People often think our troubles will begin when we run out. This is both inaccurate and misleading, and belies the urgency of the situation since many believe we won't "run out" for decades. In actuality, we will never truly run out. There will always be oil left in the ground, either undiscovered or unrecoverable, either because of remoteness or the energy required to extract it exceeds its energy value.
Abraham is a businessman who lives in Blacksburg [Virginia].
(14 October 2005)
Nice dissection of a superficial article in the mainstream media.
Marxist discussion of Peak Oil
(14-15 October 2005)
Periodically there is a spate of posts about Peak Oil and energy issues at the left Marxist discussion forum, Marxmail. The arguments about the reality and extent of Peak Oil echo arguments in the business press and in other discussion boards, though on Marxmail there is the underlying conviction that the problem can't be solved without socialism. The most recent thread of about 12 posts has "Peak oil" in the subject. To access Marxmail:
Last 100 posts
There is no Plan "B"
Jim Puplava, Financial Sense Online
The oil crisis has arrived in the United States. This summer’s storm season exposed the Achilles heel of the U.S. economy: OIL. We have reached what system analysts refer to as ”a single point of failure.” It is the one item that if it breaks down, it brings the entire system down with it. Like it or not the U.S. economy runs on oil—cheap oil—and we are running out of it. Oil powers our economy in manufacturing, transportation, and agriculture. Without it, our economy would cease to function. There is no other commodity other than water that can have such an effect on how and what we do. Oil is the lifeblood of our economy.
For three decades the energy infrastructure in the U.S. has been neglected and allowed to decay. Now those chickens are coming home to roost. Politicians can bluster and pontificate all they want, but this will not solve the predicament that we now find ourselves in. The plain fact is we are running out of oil and natural gas. Oil production in the U.S. peaked in 1970. Since then, the United States has not been able to supply its own oil needs. As a result of this failure, it lost control in its ability to influence the world price of oil. This has led to a loss of control over an important part of its economic destiny.
Today the U.S. economy is now totally dependent upon foreign sources of oil and natural gas. Our country has also moved to dependence on refined oil products such as gasoline, diesel and jet fuel due to a lack of refinery capacity; a problem that will only grow worse with time.
(14 October 2005)
Recommended by Big Gav in a post on his Peak Energy (Australia), describing it as:
a long article on the energy crisis (a bit too long if you ask me - however there is plenty of detail and a number of good diagrams). I'd disagree with some of his points (more refineries needed in the US ? is that really the best thing to be investing in to create long term energy security ?) but on the whole it is worth reading. It also includes the most memorable phrase of the wek - "SOS - Stuck On Stupid".