Is the world’s oil running out fast?

[ From the BBC article below:

“If the real figures were to come out there would be panic on the stock markets, in the end that would suit no one.”

George Monbiot’s piece in the June 8 Guardian fills in important context:

The world’s problem is as follows. We now consume six barrels of oil for every new barrel we discover. Major oil finds (of over 500m barrels) peaked in 1964. In 2000, there were 13 such discoveries, in 2001 six, in 2002 two and in 2003 none. Three major new projects will come onstream in 2007 and three in 2008. For the following years, none have yet been scheduled.

The oil industry tells us not to worry: the market will find a way of sorting this out. If the price of energy rises, new sources will come onstream. But new sources of what? Every other option is much more expensive than the cheap oil that made our economic complexity possible.

The new technology designed to extract the dregs from old fields is expensive and doesn’t seem to work very well… Extracting oil from tar sands and shales uses almost as much energy as it yields. The same goes for turning crops such as rape into biodiesel. Nuclear power is viable only if you overlook both the massive costs of decommissioning and the fact that no safe means has yet been discovered of disposing of the waste. We could cover the country with windmills and solar panels, but the electricity they produced would still be an expensive means of running our cars.

Just as the oil supply begins to look uncertain, global demand is rising faster than it has done for 16 years. Yesterday morning … the International Air Travel Association revealed that the airlines are likely to lose $3bn this year because of high oil prices.

This piece below follows up an earlier one. –BL ]

7 June 2004 | BBC News

by Adam Porter, at the Peak Oil conference in Berlin

How long will the oil keep flowing?

If you think oil prices are high at $40 a barrel then wait till they are four times that much.

How will you pay to run your car? How will you get the children to school? How will you heat your house? How much will transported food go up in price?

How will we pay for plastics, metals, rubber, cheap flights, Simpson’s DVDs, 3G phones and everlasting economic growth?

The basic answer is, we won’t.

This is the message from the Association for the Study of Peak Oil (ASPO).

The group of oil executives, geologists, investment bankers, academics and others has been warning the world of high oil prices, and the ensuing fallout, for some years now.

The end of cheap oil

It includes a diverse range of oil industry insiders.

People like Ali Bakhtiari, head of strategic planning at Iran’s National Oil Company (NOIC), Dr Colin Campbell, a former executive vice president of Total-Fina, and Matthew Simmons, an energy investment banker and adviser to the controversial Bush-Cheney energy plan.

They are united by one idea, that global oil production is about to peak, which in turn will signal the permanent end of cheap oil.

And they warn that this is the foundation of the current rise in oil prices.

Who hurts when prices explode?

“Oil is far too cheap at the moment,” says Mr Simmons.

“The figure I’d use is around $182 a barrel. We need to price oil realistically to control its demand. That is because global production is peaking.”

Large new oil fields are ever more difficult to find
“If we price oil correctly,” Mr Simmons says, “it could give us time to find bridge fuels, fuels to fill the gap between an oil economy and a renewable economy. But I don’t see that happening.”

The adherents of the peak oil theory warn the decline of world oil output will force oil prices higher for good, and that the knock on effects could be catastrophic.

“In my opinion, unfortunately, there will be no linear change,” says Iran’s Ali Bakhtiari. “There will only be sudden explosive change.”

“The people who will be least affected will be the super poor, who already have no access to energy, and the super rich who do not care if oil is $100 a barrel.”

“It is everyone who is in the middle who will be hurt the most,” says Mr Bakhtiari. “When the crisis comes there will be enormous changes.”

Oil rationing?

Dr Campbell says endless growth is not possible

Much of ASPO’s predictions stem from the calculations of Dr Campbell.

His work on oil reserves has long suggested that many official oil data are either flawed estimates or at worst downright lies.

Scandals like the 23% of ‘lost’ reserves at Royal Dutch Shell have helped to boost interest in his work.

False reserves threaten the security of energy supply, just as do bombs under pipelines.

Dr Campbell’s conclusion: oil production and consumption should be regulated by governments.

“Many reserve figures are highly questionable,” says Dr Campbell.

“Many great oil fields are increasingly old and inefficient. But I don’t think oil is easy to produce with a sniper behind every palm tree.”

“The way to increase energy security is to reduce demand,” he says.

‘Difficult times’

At ASPO’s recent conference in Berlin, companies such as BP and Exxon and men such as Fatih Birol, chief economist of the International Energy Agency, began to talk to the proponents of the peak oil theory.

Whilst they may not agree with Dr Campbell’s theories, their attendance highlighted ASPO’s emerging importance in the oil debate.

In public, Mr Birol denied that supply would not be able to meet rising demand, especially from the buoyant economies in the USA, China and India.

But after his speech he seemed to change his tune.

“For the time being there is no spare capacity. But we expect demand to increase by the fourth quarter (of the year) by three million barrels a day.”

He pinned his hopes for an increase in production squarely on troubled Saudi Arabia.

“If Saudi does not increase supply by 3 million barrels a day by the end of the year we will face, how can I say this, it will be very difficult. We will have difficult times. They must invest.”

Can Saudi deliver?

But even Mr Birol admitted that Saudi production was “about flat”.

Three million extra barrels a day would mean a huge 30% leap in output in just a few months.

North Sea oil production is in decline

When BBC News Online followed up by asking if this giant increase in production was actually possible rather than simply a desire he refused to answer. “You are from the press? This is not for you. This is not for the press.”

Asking other delegates – admittedly supporters of the peak oil theory – whether such a steep increase was feasible, the answers were unambiguous: “absolutely out of the question,” “completely impossible,” and “3 million barrels – never, not even 300,000.”

One delegate laughed so hard he had to support himself on a table.

Some recent figures tend to back up ASPO’s outlook.

North Sea production is declining at an increasing rate, having peaked in 1999.

Not at the predicted flat rate of decline of 7%, but gradually accelerating from 7% to 8.5% to 11%.

And the number of major new oil fields discovered around the world fell to zero for the first time in 2003, despite an obvious increase in technological expertise.

“We need transparency with the figures,” says Dr Campbell.

“This avoids profiteering from shortages, the collapse of poor countries and it will stimulate alternatives.”

“Consumer countries need to be able to audit fields, but at the same time ‘flat earth’ economists who believe in endless growth need to change their ideas.”

And Dr Campbell has a dire warning: “If the real figures were to come out there would be panic on the stock markets, in the end that would suit no one.”

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