Wikileaks -- Saudis Running Out of Oil
"According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the underlying timeline for their production not as unrestrained as [Saudi oil monopoly] Aramco and energy optimists would like to portray," one of the cables reads.
Just a small amount of background may be necessary for readers who haven't been obsessively reading about this issue like your hosts here have.
I touched on the analysis in my previous post, that the world is slowly, gradually running out of oil. We're not at the point yet where you pull up to a gas station and all their pumps are empty, but the problem is that there is a finite rate at which we can pump oil out of the ground. Long story short, we are fast approaching -- or, maybe already living in -- a time when the demand for oil will exceed the "peak" rate that we can produce it, even though there are still trillions and trillions of barrels buried in the ground somewhere. We haven't "run out" of oil yet. It's just that we've sucked up all the easy barrels; the rest will take more time and energy to retrieve, but demand keeps going up implacably.
As Justin alluded in his recent post, pundits everywhere are this week waking up to notice that one common component -- not the driving factor, but perhaps an essential common factor of the recent unrest in the Middle East, even Greece and elsewhere, is the high price of food. Finally this week, pundits noticed that world food-price indexes had crept up as high as they were during the food riots of 2008. Food prices are very sensitive to petroleum prices. The manufacture and application of fertilizer requires large amounts of petroleum, and obviously it needs even more petroleum to be packaged and shipped from country to country. Tunisia and Egypt are food-poor. Egypt imports half its food, and food accounts for half the national expenditure. So places like Egypt are the first ones to feel the pinch -- in the gnawing of their bellies -- as oil scarcity causes commodity and food prices to rise.
The Archdruid Report has pointed out in other contexts that modern humans -- most especially Americans -- buy into the idea that progress is a constant, an upward trending line, always building and improving upon the past. Therefore we are better off than our forefathers, who had things much better than their primitive ancestors, etc. But Peak Oil is not a straight line; it's an expression of the inexorable law of Nature that "what goes up, must come down". It's a decline that is beyond humanity's power to control. Most Americans were raised to believe that Science always marches forward, housing prices or the Stock Market "will never come down", and thus most can't wrap their minds around the concept. It generates fear, and a desire for somebody to come in and deny that the natural law is true.
For two decades or more, energy authorities such as the EIA have re-assured the public that no distress or problems would result from this situation. For most of that time, their projections have simply assumed that Saudi Arabia would step up to the plate and produce precisely the number of barrels necessary to cover that "shortfall" between world supply and demand. In other words, the Saudis used to be the "fudge factor" that will forever make the equations balance, no matter how big the shortfall may become. It was easy to get away with this charade, because information about Saudi oil reserves and production was tightly controlled by their Oil Ministry. Nobody (realistically, not even the Saudis) could say for sure what their reserves were. Indeed, during various Gulf Wars and other disasters, the Saudis did occasionally step up and increase production in order to keep the world oil market stable. Right up until a couple of years ago -- during the commodities crisis of 2008, when the Saudis apparently hit the wall and couldn't (or wouldn't) increase their production any more.
Since about that time, EIA projections have been edited so that "Fields Yet To Be Found", and "Unconventional Oil" become the new "fudge factors", the ones which convieeeeeeeniently, precisely balance supply versus demand as we move forward into a teetering future.
A lot of people see the sense in the quip, that "When Saudi Arabia has peaked, the world has peaked". But in any case, the era where we can assume the Saudis are floating on an infinite sea of oil was well and truly over a couple years ago. From the article again:
"While al-Husseini fundamentally contradicts the Aramco company company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be taken seriously."
Perhaps the official switch from using the Saudis as a "fudge factor", to using Canadian Tar Sands as the "fudge factor", reflects this assessment from November 2007. But If we had really taken that November 2007 prediction seriously, the country today would be quite a different sight than the one I see when I look out my window.
We would already have spent 3 years heavily invested in a gigantic national program to wean ourselves off of oil. Not only would alternative energy be the biggest line item in the President's budget -- drawing in the lion's share of research efforts from all the country's universities as well as private industry -- but there would be massive tax credits and subsidies given to every last citizen based on their conversion to a post-oil lifestyle (giving up their cars, insulating and modernizing their homes, growing their own food, etc. etc.)
Because a few dollars in research and tax credits today are a bargain compared to the costs that will later accrue to the government (i.e., us) as we battle Russia and China, both physically and economically, to conquer oil-rich territories -- retrofit our oil-dependent industries to use alternative fuels, in the middle of a crisis rather than at a lesiurely pace -- and deal with floods of starving refugees, in an oil-poor world.
Sometimes I joke about how new Presidents suddenly look 10 years older within a few months of taking office. Barak's hair is half grey by now, where mostly it was a virile steely black during the campaign -- and you can look up pre-/post- election pictures of every President from Jimmy Carter on down to today, and see the same effect. I have often joked that it's because the Air Force shows the new President the aliens that they have imprisoned in Area 51, and that sh#t scares you white. But in my darker moments I wonder if the big shock new Presidents get, is their first debriefing about the world energy situation.
In so many words, that briefing probably goes like this:
"The world is slowly, gradually running out of oil, while the population keeps going up quickly and steadily. New high-quality energy sources cannot possibly be developed and implemented in time to alleviate gigantic shortfalls in supply. Rising energy prices ripple through all the rest of the world economy, ultimately resulting in mass unemployment and food shortages which will topple governments, cause resource wars, and mass migrations of poor and hungry people. Even if Peak Oil is slow to bring about this situation, Climate Change is ready to do the exact same thing. The combination of the two could be twice as deadly. This is likely to ultimately result in large dieoffs all around the world. The United States is favored by several factors, but in the end won't be immune.
"However -- even ignoring the problem that the petroleum industry is so entrenched in the American lifestyle that it will be politically and economically impossible to swtich to different energy sources -- any official reaction or announcement by the United States which reflects this reality will set off a panic in world markets, causing the same turmoil and bringing on the wars sooner rather than later. Our only realistic choice is to keep on pretending that reality doesn't exist, and hope the whole house of cards doesn't come crashing down around humanity's ears until the next Administration comes in."
Hearing that from the nation's best analysts and strategists would turn my hair white, I'm pretty sure.
What we've learned, even as far back as the 1970s Oil Crisis and the 2001 California Energy Crisis, is that the process of energy starvation is not a smooth, linear thing. Nor is it a sharp divide, like a turning point. It is a chaotic process of turbulence and momentum. Even before demand actually exceeds supply, demand starts to exhaust the "marginal reserve capacity" which the energy producers are keeping in their back pockets for a rainy day. When that happens, the producers know they can jack up the price, because people are desperate. The high price causes turmoil and calamity (for everyone except the energy producers); the country or the world goes into economic recession; during a recession people use less energy; and then all of a sudden as if by magic, supply exceeds demand -- temporarily -- once again.
The process is not a sudden catastrophe or tipping point, but rather a string of multiple smaller shocks. Most of the public is mollified when the price drops back down to a "normal" level (but each time just a bit higher, to account for volatility, uncertainty and creeping scarcity). There are no gas lines, and people can afford to heat their homes again. A few economists even start grousing about a (temporary) "oil glut" again. After each small disruption or shock plays out, people prefer to believe that we have "resolved" the problem. But this is basically just delusion. It's only in the long run, over decades and decades, that the multiple small shocks settle on an end-state that is a rather different one from the American 1950s-era economic models which assume plentiful resources.
I myself have certainly been guilty of predicting a Mad Max type turning point in the past, (predicting that Armageddon arrives in one fell swoop and there's no going back). But today's older and [hopefully] wiser me realizes that things won't play out quite so dramatically. The Archdruid seems to have a good handle on my updated prediction. The turbulent nature of the crisis market means there will still be the occasional stretches of good times, pockets of "normal" prices, and a functioning economy where people, however impoverished, can pretend that we have "solved" these intractable, unsolvable problems. These will occur in-between bouts of destitution and starvation around the world, as the crisis hits one country after another, depending how vulnerable they are. The US has a lot of formidable protections against these kinds of disruptions, but those protections can't last forever in the face of a world starved for energy and food.
Small crisis, breather, small crisis, breather... dwindling US prosperity, food riots, local resource conflicts rising to cross borders... guess what? That's not how Peak Oil will play out 50 years from now... that's the situation we're in today.
So here's a little in-joke, for those of us old enough to dimly remember the 1970s oil crisis:
11 comments:
That's good stuff.
I'd say the problem is that most people think of 5 or 10 years as "long-term." Of all my friends and acquaintances, they have little pockets where they look further down the road: house mortgage, child's college education, and "retirement."
But they aren't habitually wondering, "do we have enough oil for my grandchildren?"
Most seem to simply assume it will be there, and those who entertain any doubt seem inclined to believe some form of technological miracle will save us.
Even if nobody's really working toward it. Even then.
Some of us look 25, 50, 100 years down the road. We see the events that will hit, we can't say when exactly, we can't say whether there will be confluences of crises and how those confluences will reveal themselves... but we see the need to start changing things now, to minimize what will happen then.
Sadly, that approach is too far-seeing and too selfless for most to entertain seriously at any point before immediate personal crisis strikes.
That was excellent, Thomas. Thank you. (And, as an extra coinky-dink, my comment verification word is "poloot")
I started reading the arch druid a couple months ago, yet another writer who makes me feel redundant and a poor substitute for others.
The gray area on that graph is for fields that have not yet been developed, I assume these are oil fields in very hard to develop places, where we do not yet have the technology or it is not cost effecient (meaning it would cost more to pump out of the ground than you could sell it for on the market) to bother with. One thing people ought to think about is what it would mean if those fields did become worth the cost of getting at. A barrel of oil is currently at $100, will it have to be at $200 before those fields become viable? At that point, the world will have bigger issues to deal with than the availability of oil.
One of the other points the Archdruid makes is that on the down-slope of Hubbert's peak, we will try anything and everything to keep things going. Among other things, this likely means nuclear power plants going up all over the place and burning every last bit of coal we can find. The environmental costs - especially nuclear power- are likely to stay with our species for as long as it exists. And even though most of these alternative energies are fools gold because they take as much or more energy to produce as you get from the yield, there will be plenty of people looking to get rich pushing them as a genuine alternative to oil - just as we saw with corn-based ethanol.
The archdruid is an excellent writer. Justin...but does he do surrealistic expressionist painting? So...no redundancy there.
I read his post a couple of weeks ago and it really hit me. The other, of course, is the fascinating Orlov and his comparison of thee collapse of the Soviet Union and his predicted collapse of the American economy.
Orlov has a very interesting perspective. One thing to ponder is what if one day a bunch of folks from 100 years in the future arrived in a time travelling device, say a handful of politicians, business leaders and scientists, from a future era and they brought the message that we were heading for a short fall off a high cliff in a few years. And say they cataloged all the coming problems that turn out to be more or less as the worst peak oil crowd says. What could we do? What would we do? I tend to think not much of anything. We are locked into our present course. We are incapable of changing, which is why we have so much delusion and wishful thinking around these issues. Compounding this issue is that the people who have the most to lose from systemic failure are the people who currently benefit from it the most, and as such, are the decision makers and power-brokers who will fight tooth and nail to ride it to the very end.
Considering the myriad of potential ways humanity may commit suicide before the end of the century, peak oil seems benign if not welcome. Also I'm skeptical of the reliability of remaining oil estimates--Peter Mass makes a good case re: Saudi in Crude World but can we reliably generalize from this particular country?
It's worth noting, too, that the speculative markets may have an interest in underestimating crude supplies depending on what hedge funds, derivatives etc want prices to do (e.g., recent increases him oil prices haven't been the result of a shift in supply vs demand).
Finally, it's interesting that the mainstream advocates always pose "alternative" energy as the solution--beyond consideration is that in fact we would probably have to do what Cuba did* and simply drastically reduce energy consumption.
*Cf. "The Power of Community: how Cuba Survived Peak Oil".
Recent short video of Orloff discussing Peak Oil:
http://www.thenation.com/video/157985/dmitry-orlov-peak-oil-lessons-soviet-union
Part of an interesting series of interviews about Peak Oil.
However -- very typical of "The Left" press these days, I got a chuckle out of this -- the interview subjects are billed as "EXPERTS", when near as I can tell, there isn't a single geologist or even engineer among them. They're all bloggers and writers. They got Chomsky, Palast, and Kunstler, but couldn't even cough up a Matt Simmons. Pretty typical of the way America treats these types of subjects... as a political football rather than a potential Extinction Event.
BTW Thanks everybody, those are very sharp comments.
* CFO, very true. Most people are forcibly trained by parents or school to plan ahead for certain things, but we're too lazy to plan ahead for everything in general. As an anti-capitalist cynic, I must also add, that the capitalist system encourages instant gratification, and we've been steeped in it for decades or centuries. We end up planning for kids and mortgage because we absolutely must, but in other respects, it's a culture of "I want it now".
* Justin, I started reading the ArchDruid after you linked to him.
* Peter Ward, I'm not sure I understand your perspective. I interpret your comment to say that there may be larger oil reserves than my sources are predicting, because (outside of Saudi Arabia) there may be financial incentives to under-estimate.
Maybe true -- I recall reading an article that said the incentives, the over-/under-estimation varies from country to country... but ultimately, the quantity of reserves is less important than the rate in gallons per minute or barrels per day, that we can pull it out of the ground. That rate has a maximum limit due mainly to geologic factors (the "gushers" don't squirt themselves out of the ground anymore, like they literally used to do in the '20s; we have to spend energy and technology to pull it out laboriously with pumps instead). (Also the infrastructure is aging.) So the point is that world demand is probably right around equal to that hard limit of extraction. Meanwhile, demand seems certain to increase, while ultimately whenever we hit the "Peak" extraction rate (this year or some other year), the rate will go down on the other side.
One last thing -- since there seems to be interest and comments here -- I'll mention something I cut out of the article for length. (Believe it or not, my article was 50% longer before I trimmed it.)
I mentioned that the US "is favored by several factors". I've read articles recently saying the latest modeling predicts that the effects of Global Warming won't hit the continental US as hard as other locations around the world.
In fact, you might have read, the US and other Northern Hemisphere 1st-world countries will experience unusually cold, snowy winters due to Global Warming, as moist Arctic air from the melting icecaps penetrates farther South than it used to. (Note the linked article predates this year's cold winter by 6 months)
Furthermore, due to the shapes of the land masses and the air currents, the warming during summer won't be as severe here as in other countries. In fact, due to the carbon dioxide increasing while U.S. cold zones become more temperate due to global warming, some US staple food crops will receive as much as a 20% boost, at least during the first half of this century.
So we can just give up on any hope of convincing Americans, as a nation, that Global Warming is real. Even while Australia literally catches on fire during December (the Austral summer), due to high temperatures, we can look forward to another 50 years of Americans saying "What's this Global Warming crap? It's 5 degrees in Poughkeepsie today!" While a lot of poor countries experience a 5 to 30% decline in crop yields, redneck Americans will still be saying that "good ol' American know-how is feeding the world" and "there's no Global Warming, it's them swarthy furriners own fault that they can't feed themselves".
A cynic might imagine the Dick Cheneys of the US cackling with glee at the prospect of selling our bumper crops at crisis prices to the rest of the world... but it'd be a Phyrric victory. You can't make an awful lot of money selling wheat to peniless refugees.
Thomas --
Redneck Americans AND self-impressed well-educated Yuppie Americans as well. 'Cuz it ain't just the rural rubes who promote and believe American Exceptionalism. A lot of people believe it. My brother, my parents -- they believe it, and they're not ill-educated nor generally unintelligent.
It's good to compare global climate change and peak oil because both require a long view to see what's happening. In the climate's case, short-term extra snow is all some people need to see to imagine there's no warming... they can't be bothered to learn that more snow can accompany warmer temperatures otherwise (which is what my western Montana region is experiencing this year), or other natural-environment-corroding features.
"If it's snowier this year, then there's no trend."
That sort of thing.
Also with peak oil -- "well I heard gas would go above $3/gal when it got scarce -- and it went up there for a while, but it's back down now. Crisis averted."
Interestingly enough, there was an article in the "Mainstream Media" about new oil extraction techniques which have effectively created an oil boom in North Dakota, of all places. The claim (exagerated? I don't know) is that this technology effectivly creates the fourth largest oil field ever found in the united States.
of course, the technology involves injecting large quantities of poisonous chemicals into the ground to chemically crack open the rock formations. Of course, there will be absolutely no impacts on ground water supplies. None at all, I tell you.
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