Sunday, August 21, 2005

All the oil news that's fit to print

The New York Times Magazine has a long piece on oil supplies which mentions peak oil. Two keys things which have been noted here and in many other places in the peak oil community are worth mentioning.

First, the piece mentions that Saudi Arabia is considered the key to raising oil production to meet world demand. It then outlines energy investment banker Matthew Simmons' contention that Saudia Arabia is near or at peak production and will not fulfill its expected role. Simmons provided a detailed analysis of the problem in his recently released book, "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy." Saudi oil officials, of course, dismiss Simmons' claims. In the Times piece Simmons makes a sensible response, one that he has reiterated several times in the last few months:

"If they want to satisfy people, they should issue field-by-field production reports and reserve data and have it audited,'' he told [the reporter]. ''It would then take anybody less than a week to say, 'Gosh, Matt is totally wrong,' or 'Matt actually might be too optimistic.'''

So, what is the response of the Saudi national oil company? "Either you believe us or you don't." The Saudis have the power to resolve all doubts within a few weeks, but they refuse any field-by-field accounting of their oil and they refuse any external, independent audit. Is this how people who are telling the truth behave?

The second critical issue concerning supply projections is somewhat buried in the article. Again and again, people have pointed out that supply projections provided by the U. S. Energy Information Administration are based not on reasonable, well-documented evidence of future supply, but rather on demand projections. You read that right! The EIA figures out what it believes future demand will be and then simply assumes that the supply will be there to meet it. Recently, even Saudi Arabia warned that it will not be able to live up to the EIA projections for increased supply.

Nearly all of the ground covered in the Times piece is not new. What's new is that the Times is covering it. Is anyone in America's circles of power capable of listening?

Tuesday, August 09, 2005

Congress's Rapid Energy Depletion Bill

While the pundits analyze the fossil fuel subsidies and nuclear industry giveaways in the energy bill only just signed by President Bush, they miss the overall. From the standpoint of ecology, the primary strategy behind the bill is a simple one: Increase the rate of drawdown in order to shore up a world economic and social system that is suffering gravely from the effects of a global environmental meltdown.

Drawdown, you may recall, is one of two strategies that animals use to obtain food and other resources they need. Drawdown is a strategy of drawing down finite resources in a way that temporarily increases the carrying capacity of a given area. (The other strategy is takover, as in taking over land, forest and other renewable resources for one's own use.)

In his brilliant 1980 book, Overshoot William Catton describes The Great Depression as an ecological crisis. Occupational niches were wiped out willy nilly within a couple of years as a worldwide economic system devolved into a more national and local one with all the attendant disruptions. The solution: In Hitler's Germany it was to create vast new occupational niches in the armaments industry and put others to work by increasing the size of the military. All of this was accomplished, of course, by increasing the drawdown of finite fossil fuels, especially coal and oil.

In World War II, the United States followed suit, creating a vast new military-industrial complex that remains with us today as an indispensible source of employment. That complex is all based, of course, on drawdown. As is the case with any drawdown situation, the faster you draw down resources, the richer and better you feel. Everything goes along swimmingly until the rate at which you can draw down the crucial resources starts to decline--oil comes to mind.

America's new energy policy isn't so much about the future as it is about the past. Drawing down precious finite resources of coal, oil and natural gas worked in the past to "solve" our problems, so we are going to try doing even more of it now. Of course, the irony of this is that all the money spent on better technology to draw down finite resources at faster rates only brings the inevitable crisis that much closer while making it that much worse when it does arrive.

Those who think that technology will save us fail to recognize that technology is what got us here. Technology is what has enabled us to draw down finite energy and other resources at faster and faster rates with all sorts of deleterious environmental side effects--global warming comes to mind.

Perhaps the answer to our energy woes is something Congress can't even contemplate. Perhaps the answer is less technology. After all, technology is what consumes such great amounts of energy while promising to provide the means to get more of it faster. Thus, technology creates an ever accelerating circle of activity from which there is no escape.

Is it possible so slow that circle down or even step outside of it? Would we be better off if we did?

Don't expect anyone in Congress* to discuss such an approach or to campaign on it in the coming election. Preaching restraint is a certain loser and every politician knows it. That may seem odd since self-restraint used to be a virtue. Now it is considered an economic impediment. Unfortunately, restraint is also the only path to long-term sustainability.

How much longer will we be able to afford to ignore the warning signals of resource exhaustion and environmental pollution before the day of reckoning arrives? No one really knows. But one thing is certain. The Congress's rapid energy depletion bill is certain to move that day ever closer.


*There is one brave exception. One must give Rep. Roscoe Barlett of Maryland a great deal of credit for trying to bring the issue of peak oil to the attention of his colleagues. So far he's not making much progress.

Monday, August 01, 2005

Oil Supplies and the "Infallible" Goddess of the Marketplace

It is unfortunate that the debate over when and whether world oil production will peak has taken on the character of a grudge match. Underlying the debate is a grudge against those who believe the marketplace cannot solve all of our problems, especially problems which stem from resource depletion.

On one side are a group of retired petroleum geologists and academics including Colin Campbell, Jean LaHerrere and Kenneth Deffeyes who have provided extensive research on world peak oil production and its timing. On the other side are prominent energy consultants such as Michael Lynch and Daniel Yergin (Cambridge Energy Research Associates) who claim that energy supplies are ample and that any energy transition is far away and will be smooth.

Campbell, LaHerrere and Deffeyes have little to gain from their prognostications. Their concern about oil depletion has been a decades long one, and they are all retired now. Lynch and Yergin are active consultants who make their livelihood projecting energy supply and prices. To be fair, some who are sounding the alarm about peak oil are consultants and investment bankers and managers. The most prominent among them is Matthew Simmons who insists that it would actually be better for his business if he didn't ruffle so many feathers with his outspoken warnings. Both sides then have every incentive to get their forecasts right.

Is it really just a case of bulls and bears espousing their opinions about the direction of the petroleum markets? Or does the disagreement stem from something more basic? I think the answer can be found, in part, in Yergin's paean to free-market ideology, "Commanding Heights." The book traces the transition away from government control of the world's economies to the laissez-faire ideology of today. There is no doubt where Yergin stands. Peak oil critics such as Yergin and Lynch believe the marketplace can solve all the world's ills. What they do not explain is why, with their preferred free-market ideology now ascendant practically everywhere, the marketplace is only making global warming, soil erosion, deforestation, and water depletion worse. They glide around all questions of ecological damage and focus on economic growth alone. They are cornucopians who cannot fathom the possibility of limits to growth.

When such cornucopians are asked how the marketplace would handle a hypothetical peak in world oil production in the next five years, they respond that there will be no peak. Do they have perfect knowledge of the future? Lynch's crystal ball has been off recently. In April 2004, he predicted $25 a barrel oil by the summer of 2004. In 2001 Yergin's organization predicted growing supplies of natural gas for the United States through 2005. The reality has been very different as Yergin admitted to Congress last year.

So why do these cornucopians behave as if they have been the recipients of infallible whisperings from the goddess of marketplace? Because they have no answer to an imminent oil peak, save perhaps that the marketplace would be "self-correcting" by "destroying demand." That's a polite way of saying a lot of people would have to do without, and for many that could mean doing without the very necessities of life: food, water, and heat. In short, Lynch and Yergin seem to be saying that because the marketplace would not produce a salutary outcome, such an outcome must be impossible.

A pragmatic person might admit that no one has perfect knowledge of oil supplies or of the future. He or she might try to construct scenarios from very favorable to very unfavorable to discern the risks. And, then such a person might suggest ways to mitigate those risks. Such a person (actually three people) has done just that for the U. S. Department of Energy.

The Department of Energy study is the result of an open, pragmatic mind, and its message is not all that sanguine: Even if the peak is 20 years away, we would have to start a crash program now to make up for the loss of liquid fuels after the peak. Given what's at stake, is it really wise to rely on whispers from the goddess of the marketplace into the ears of the chosen ones?

UPDATE: An anonymous commenter brings our attention to Richard Heinberg's explanation of an oil depletion protocol designed to reduce oil consumption and encourage energy savings. Such a protocol would use both non-market and market mechanisms in a pragmatic approach to heading off the substantial disruptions that are sure to follow an oil peak.