The Peak Oil Crisis: Mid-Year 2005

Falls Church News-Press

July 7, 2005

As we enter the second half of the year, there is still no general recognition that a world-class crisis is about to take place.

Optimism abounds.

In June General Motors, by offering “employee discounts,” managed to increase sales to the highest level in 19 years. A senior official of the Saudi Oil Company has been running around Washington with the message – “All is well.” Saudi Arabia will increase its production from the current 10 million barrels a day to 12 or 15 million or perhaps down the road, 25 million. Allegations that Saudi production is about to enter a steep decline are said to be simply not true.

The U.S. economy is still doing well with only the first glimmer that much higher energy prices will soon devastate the bottom line of many corporations. Over the 4th of July weekend, Americans took to the highways in record numbers undeterred by $2.25 gasoline. Congress, feeling impelled to do something about rising gas prices, has passed a pair of dissimilar energy bills which, even though they will have little immediate impact, make it look as if our elected representatives are doing something.

However, despite the apparent lack of concern, the evidence continues to accumulate that we are rapidly approaching a sizeable mismatch between available supply and demand. Last week, oil climbed to over $60 a barrel, settled back several dollars, and climbed again. These fluctuations are attributable to concerns about supplies and to producer secrecy that leaves oil traders with imperfect knowledge as to the true world oil situation. This in turn leads to price gyrations based on political developments having the potential of leading to restrictions on oil supplies.

To remedy the information situation, the Group of 8 has established the Joint Oil Database Initiative with the task of providing accurate monthly data on oil inventories, supply, and demand of 93 countries. Last week, however, the International Energy Forum announced first issuance of the new database has been delayed until November due to difficulties in obtaining accurate information.

Reports from the more transparent countries continue to speak of production declines. Last year, British and U.S. production declined by 230,000 and 160,000 barrels a day respectively. The Mexicans are reporting that production from their giant Cantarell field has peaked and a decline in production on the order of some 15% per annum is to be expected. With the exception of the Saudi claims they will be able to increase production over the next few years, there appears to be little but wishful thinking to offset reports of worldwide declines in production from aging oilfields.

One development of note last week was Congressman Roscoe Bartlett (R Md. ) finally got in to tell President Bush about Peak Oil. According to Bartlett ’s press release, he met with the President on June 29 at the White House for “an extensive discussion about peak oil— the end of cheap oil.” Bartlett declined to discuss or characterize any of his conservation with the President, but said he was happy about the meeting. Bartlett is the only member of Congress who has been speaking out regularly on the dangers the country is about to face from oil shortages. The White House does not appear to have taken official note of the meeting.

In another interesting development, Fidel Castro became the first head of state to speak out bluntly on the impending energy crisis. Speaking at the first PetroCaribe Energy Summit, Castro noted that within the decade oil would cost $100 per barrel, an amount no Caribbean country can afford. At the end of the summit, Venezuelan President Chavez announced a plan to sell oil at a 40 percent discount to Caribbean countries.

These developments again raise the question of what it will take to trigger public recognition by the major industrial powers that a disaster of monumental proportions is near. Obviously, no responsible leader wants to trigger a panic by openly announcing oil will soon become very expensive, and then very scarce, and finally unavailable. But, there are many subterfuges that could be used as a pretext for taking drastic action without even mentioning the concept of peak oil.

The Europeans and the Japanese seem to be on the verge of doing something under the banner of slowing global warming which is quite acceptable to talk about and may someday prove to be more serious than peak oil. Policies which mitigate global warming by lowering consumption of fossil fuels, are the same ones that would be used to mitigate the initial stages of an energy crisis. Last weekend, the British announced the cabinet would soon consider a form of energy rationing called a “personal carbon allowance.”

Another great pretext for decisive action is the war on terrorism, which is turning out to be useful for justifying almost anything. The government, or maybe several governments, could simply announce the threat of terrorists disrupting world oil shipments is so great that we must immediately take many painful steps to prepare for the eventuality. However, for the time being, muddling through seems to be the word of the day, and at present, the U.S. appears unlikely to take any politically unpopular actions — such as reinstating the 55 mph speed limit — until the price at the pumps is considerably higher or the gas lines begin to form.

Thus, as we move into the Summer of 2005, it would appear that the United States , the most oil dependent country on earth, is in near total denial about the twin specters of global warming and peak oil.

http://www.fcnp.com/518/peakoil.htm