Guest Post: Peak Denial About Peak Oil

Tyler Durden's picture

Submitted by Jim Quinn of The Burning Platform

Peak Denial About Peak Oil

It is par for the course that with oil hovering between $70 and $80
per barrel Americans have continued to buy SUVs and Trucks at a rapid
pace. Politicians don’t have constituents screaming at them because gas
is $4.00 per gallon, so it is no longer an issue for them. They need to
focus on the November elections. It is no time to discuss a difficult
issue that requires foresight and honesty. It is no time to tell the
American public that oil will be over $200 a barrel within the next 5
years. Anyone who would go on CNBC today and declare that oil will be
over $200 a barrel would be eviscerated by bubble head Bartiromo or
clueless Kudlow. Bartiromo filled up her Escalade this morning for $2.60
a gallon, so there is no looming crisis on the horizon. The myopic view
of the world by politicians, the mainstream media and the American
public in general is breathtaking to behold. Despite the facts slapping
them across the face, Americans believe cheap oil is here to stay. It is
their right to have an endless supply of cheap oil. The American way of
life has been granted by God. We are the chosen people.

A funny thing happened on our way to permanent prosperity and
unlimited cheap oil. The right to prosperity was yanked out from
underneath us by the current Greater Depression. The worldwide economic
downturn has masked the onset of peak cheap oil. Therefore, when it hits
America with its full fury, it will be a complete surprise to the
ignorant masses and the ignorant politicians who run this country. A
Gallup Poll in August asked Americans about our most important problems.
Where is the concern about future energy supplies? It isn’t on the
radar screens of Americans. They are probably more worried about whether
The Situation will hook up with Snookie on the Jersey Shore reality
show.

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It is not surprising that the American public, American politicians,
and the American media don’t see the impending crisis. The organizations
that have an interest in looking farther than next week into the future
have all concluded that the downside of peak oil will cause chaos
throughout the world. The US Military, the German Military, and the UK
Department of Energy have all done detailed studies of the situation and
come to the same conclusions. Social chaos, economic confusion, trade
barriers, conflict, food shortages, riots, and war are in our future.

http://www.acus.org/docs/051007-Hirsch_World_Oil_Production.pdf

The U.S. was warned in 2005. Its own Department of Energy
commissioned a report by Robert Hirsch to examine peak oil and its
potential consequences to the US. The introduction stated:

“The peaking of world oil production
presents the U.S. and the world with an unprecedented risk management
problem. As peaking is approached, liquid fuel prices and price
volatility will increase dramatically, and, without timely mitigation,
the economic, social, and political costs will be unprecedented. Viable
mitigation options exist on both the supply and demand sides, but to
have substantial impact, they must be initiated more than a decade in
advance of peaking.”

The main conclusions reached by the experts who worked on this report were:

  1. World oil peaking is going to happen, and will likely be abrupt.
    World production of conventional oil will reach a maximum and decline
    thereafter.
  2. Oil peaking will adversely affect global economies, particularly the
    U.S. Over the past century the U.S. economy has been shaped by the
    availability of low-cost oil. The economic loss to the United States
    could be measured on a trillion-dollar scale. Aggressive fuel efficiency
    and substitute fuel production could provide substantial mitigation.
  3. The problem is liquid fuels for transportation. The lifetimes of
    transportation equipment are measured in decades. Rapid changeover in
    transportation equipment is inherently impossible. Motor vehicles,
    aircraft, trains, and ships have no ready alternative to liquid fuels.
  4. Mitigation efforts will require substantial time. Waiting until
    production peaks would leave the world with a liquid fuel deficit for 20
    years. Initiating a crash program 10 years before peaking leaves a
    liquid fuels shortfall of a decade. Initiating a crash program 20 years
    before peaking could avoid a world liquid fuels shortfall.
  5. It is a matter of risk management. The peaking of world oil
    production is a classic risk management problem. Mitigation efforts
    earlier than required may be premature, if peaking is long delayed. On
    the other hand, if peaking is soon, failure to initiate mitigation could
    be extremely damaging.
  6. Economic upheaval is not inevitable. Without mitigation, the peaking
    of world oil production will cause major economic upheaval. Given
    enough lead-time, the problems are soluble with existing technologies.
    New technologies will help, but on a longer time scale.

The Hirsch Report clearly laid out the problem. It urged immediate
action on multiple fronts. It is now 5 years later and absolutely
nothing has been done. In the meantime, it has become abundantly clear
that worldwide oil production peaked between 2005 and 2010. The Hirsch
Report concluded we needed to begin preparing 20 years before peak oil
in order to avoid chaos. We are now faced with the worst case scenario.

http://www.fas.org/man/eprint/joe2010.pdf

The US Military issued a Joint Operating Environment report earlier
this year. They have no political motivation to sugarcoat or present a
dire picture. This passage is particularly disturbing:

A severe energy crunch is inevitable
without a massive expansion of production and refining capacity. While
it is difficult to predict precisely what economic, political, and
strategic effects such a shortfall might produce, it surely would reduce
the prospects for growth in both the developing and developed worlds.
Such an economic slowdown would exacerbate other unresolved tensions,
push fragile and failing states further down the path toward collapse,
and perhaps have serious economic impact on both China and India. At
best, it would lead to periods of harsh economic adjustment. To what
extent conservation measures, investments in alternative energy
production, and efforts to expand petroleum production from tar sands
and shale would mitigate such a period of adjustment is difficult to
predict. One should not forget that the Great Depression spawned a
number of totalitarian regimes that sought economic prosperity for their
nations by ruthless conquest.

Here is the summary of their analysis:

To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBD every year until then.

During
the next twenty-five years, coal, oil, and natural gas will remain
indispensable to meet energy requirements. The discovery rate for new
petroleum and gas fields over the past two decades (with the possible
exception of Brazil) provides little reason for optimism that future
efforts will find major new fields.

At
present, investment in oil production is only beginning to pick up,
with the result that production could reach a prolonged plateau. By
2030, the world will require production of 118 MBD, but energy producers
may only be producing 100 MBD unless there are major changes in current
investment and drilling capacity.

By
2012, surplus oil production capacity could entirely disappear, and as
early as 2015, the shortfall in output could reach nearly 10 MBD.

Energy
production and distribution infrastructure must see significant new
investment if energy demand is to be satisfied at a cost compatible with
economic growth and prosperity. Efficient hybrid, electric, and
flex-fuel vehicles will likely dominate light-duty vehicle sales by 2035
and much of the growth in gasoline demand may be met through increases
in biofuels production. Renewed interest in nuclear power and green
energy sources such as solar power, wind, or geothermal may blunt rising
prices for fossil fuels should business interest become actual
investment. However, capital costs in some power-generation and
distribution sectors are also rising, reflecting global demand for
alternative energy sources and hindering their ability to compete
effectively with relatively cheap fossil fuels. Fossil fuels will very
likely remain the predominant energy source going forward.

Just this week, the German magazine Der Spiegel obtained a
confidential study about peak oil that was done by the German military.
According to the German report, there is “some probability that peak oil
will occur around the year 2010 and that the impact on security is
expected to be felt 15 to 30 years later.” The major conclusions of the
study as detailed in Der Spiegel are as follows:

  1. Oil will determine power: The Bundeswehr
    Transformation Center writes that oil will become one decisive factor in
    determining the new landscape of international relations: “The relative
    importance of the oil-producing nations in the international system is
    growing. These nations are using the advantages resulting from this to
    expand the scope of their domestic and foreign policies and establish
    themselves as a new or resurgent regional, or in some cases even global
    leading powers.”
  2. Increasing importance of oil exporters: For
    importers of oil more competition for resources will mean an increase in
    the number of nations competing for favor with oil-producing nations.
    For the latter this opens up a window of opportunity which can be used
    to implement political, economic or ideological aims. As this window of
    time will only be open for a limited period, “this could result in a
    more aggressive assertion of national interests on the part of the
    oil-producing nations.”
  3. Politics in place of the market: The Bundeswehr
    Transformation Center expects that a supply crisis would roll back the
    liberalization of the energy market. “The proportion of oil traded on
    the global, freely accessible oil market will diminish as more oil is
    traded through bi-national contracts,” the study states. In the long
    run, the study goes on, the global oil market, will only be able to
    follow the laws of the free market in a restricted way. “Bilateral,
    conditioned supply agreements and privileged partnerships, such as those
    seen prior to the oil crises of the 1970s, will once again come to the
    fore.”
  4. Market failures: The authors paint a bleak picture
    of the consequences resulting from a shortage of petroleum. As the
    transportation of goods depends on crude oil, international trade could
    be subject to colossal tax hikes. “Shortages in the supply of vital
    goods could arise” as a result, for example in food supplies. Oil is
    used directly or indirectly in the production of 95 percent of all
    industrial goods. Price shocks could therefore be seen in almost any
    industry and throughout all stages of the industrial supply chain. “In the medium term the global economic system and every market-oriented national economy would collapse.”
  5. Relapse into planned economy: Since virtually all
    economic sectors rely heavily on oil, peak oil could lead to a “partial
    or complete failure of markets,” says the study. “A conceivable
    alternative would be government rationing and the allocation of
    important goods or the setting of production schedules and other
    short-term coercive measures to replace market-based mechanisms in times
    of crisis.”
  6. Global chain reaction: “A restructuring of oil
    supplies will not be equally possible in all regions before the onset of
    peak oil,” says the study. “It is likely that a large number of states
    will not be in a position to make the necessary investments in time,” or
    with “sufficient magnitude.” If there were economic crashes in some
    regions of the world, Germany could be affected. Germany would not
    escape the crises of other countries, because it’s so tightly integrated
    into the global economy.
  7. Crisis of political legitimacy: The Bundeswehr
    study also raises fears for the survival of democracy itself. Parts of
    the population could perceive the upheaval triggered by peak oil “as a
    general systemic crisis.” This would create “room for ideological and
    extremist alternatives to existing forms of government.” Fragmentation
    of the affected population is likely and could “in extreme cases lead to
    open conflict.”

Even the International Energy Agency, which has always painted a rosy
picture of the future, has even been warning about future shortages due
to lack of investment and planning.

http://www.worldenergyoutlook.org/docs/weo2009/WEO2009_es_english.pdf

Americans think that the discovery of oil on our soil in 1859 has
entitled us to an endless supply. It is not so. We account for 4.3% of
the world’s population but consume 26% of the world’s oil. As China,
India and the rest of the developing world become economic powerhouses,
they will consume more and more of the dwindling supply of easily
accessible oil. As the consumption curve continues upwards, the
production curve will be flat. The result will be huge spikes in prices.
It will not be a straight line, but prices will become progressively
higher. As the studies referenced above have concluded, the result will
be economic pain, social chaos, supply wars, food shortages, and a
drastic reduction in lifestyles of Americans. They won’t see it coming,
just like they didn’t see the housing collapse coming or the financial
system collapse coming. They’ll just keep filling up those Escalades
until the pump runs dry.

 

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VK's picture

Have you even seen the Hirsch Report? or the recently released study by the German Military on peak oil? http://www.spiegel.de/international/germany/0,1518,715138,00.html

Taken a look at Chris Martenson's Crash Course?

EscapeKey's picture

The US Military acknowledges the problem, as well. They released an army report earlier in the year, which included their thoughts on the topic.

DarkAgeAhead's picture

Yep, or any of Amory Lovins work on Soft Energy Paths, or his research with the military about "Winning the Oil End Game."

Peak oil and carbon are interrelated, as are all things, but also mutually exclusive.  Whatever one might believe about Carbon and its planetary impacts need not have any bearing on their belief about peak or nonpeak oil...

DarkAgeAhead's picture

Yep, the Harvard Business Review article does a decent job of summarizing the book Natural Capitalism, which is available free online.

www.oilendgame.com/

http://en.wikipedia.org/wiki/Soft_energy_path

I'm not with Lovins on nuclear, but not sure where I stand either.  Probably for.

kathy.chamberlin@gmail.com's picture

not on higher ground i am assuming. peace, babe.

Sean7k's picture

You are still believing what governments and scientists project without considering their motives?

Peak oil? Fine. Big deal. If I owned an escalade and had a home dependent on all kinds of energy usage I might worry. However, you have to be pretty stupid to depend on outside sources of energy. 

This article accepts every government statement verbatim. It assumes nothing will be done to fill the technological vacuum. It is even dated on energy use by country (china surpassed the us in oil consumption). 

It is written by people who depend on the government and /or are employed by government to solve their problems. This is the definition of sheeple. 

No diesel for my tractor? Wow, I make biodiesel. No gas for my car? Wow, I convert and use biodiesel. Ride a bike, ride a horse, electric car-coal fired generation plants,solar energy, wind generation, nuclear energy, the list goes on.  

The world will adjust, the bigger question should be: who gains from the hype? Hmmm, the biggest corporations in the world? Americans are so dumb they get tutored by polish blondes.

kathy.chamberlin@gmail.com's picture

yes, i believe the message about Particulates, alternatively referred to as particulate matter (PM) or fine particles and also called soot, hype is a scam. in my old mountain town residence, and even front range cities, they warn over the tv and newspapers. not allowed to burn wood in fireplace or wood stoves, with certain high levels of PM's (not precious metals) in air. they want you to buy gas stoves.

polish blondes, bastards

Frank Owen's picture

No gas for my car? Wow, I convert and use biodiesel.

Good luck with that.

DaveyJones's picture

Guess he doesn't need to eat

Hulk's picture

guess he doesn't need to drive either...

Frank Owen's picture

from your second link: the complex multi-step process will always consume significantly more energy than the fuel it produces could yield.

So, forget about that.

MayIMommaDogFace2theBananaPatch's picture

They're planning to make up for that in volume.

1100-TACTICAL-12's picture

I agree, it is amazing how many people have their head's firmly inserted up their asses.

Frank Owen's picture

Yep, some of us idiots just can't accept santa clause is real. You just keep believing in abiotic oil no matter what.

SheepDog-One's picture

By the way, peak oil is the least of your worries, better worry about peak bullets and peak food stored. In the looming debt default, filling your Escalade will be the LEAST of your worries.

kathy.chamberlin@gmail.com's picture

peak oil is the least of your worries

peak food or lack of food isn't even included in that list of:

What do you think is the most important problem facing this country today.

guess all the americano fatties, don't worry about their body supply fuels, ever drying up. peak death by starvation. only in america, not listing food as the most important problem. ask that same question to the rest of the world and it probably would be first on the list. american's are so complacent about food. cause they eat anything just to stuff their mouth.

 

G O T    M I L K, bitches.

Citxmech's picture

Problem is, peak oil is peak food.

Fertilizer, food processing, irrigation, transportation, etc, etc... 

Mad Max's picture

Give that man a cigar!  Or, at his option, a bag of rice...

DarkAgeAhead's picture

Absolutely.  Peak oil is peak everything.  And bioplastics likely mean destroying soil fertility.  There's not many good answers out there. 

Milestones's picture

Wrong! The problem is peak population, not peak oil. Birds, anamials, fish etc do not use OIL-only people do.We are the problem!! My guess would be 5-7 years before we  see massive genocide using small nukes so that most dead bodies are fried & thus cut done costs and fear of plagues from unburied bodies. 6,000,000 inWWII, walk in the park.   Milestones

 

lost in the usa's picture

Try reading down this blog site.

Without an energy policy and without the controls we would grow any way we chose as individuals, throw the gov in and they live good and we run out of innovations. We only use

.01 or .1 % of the power hitting the earth every year if we run out of power it is because we are stupid.

That dose not include what we could do with thorium or nuclear.

Maybe if we all got fighter plains and burned up 1000's of pounds of fuel an hour we would run out but us normal folks will grow with the technology and use it as it becomes available.

http://alfin2300.blogspot.com/

hedgeless_horseman's picture

Please explain this:

Houston City Council OKs gas exploration beneath parks

http://www.chron.com/disp/story.mpl/metropolitan/7182585.html

SheepDog-One's picture

Gas exploration? Theyve just tapped the largest pockets ever found, and we're at peak STORAGE, so youre trying to say we're desperately scratching for gas? Nonsense. We cant even find places to store whats already on hand.

hedgeless_horseman's picture

I am confused.  Your explanation for Houston, America's 3rd largest city, drilling exploration wells in its city parks is this?

Theyve just tapped the largest pockets ever found, and we're at peak STORAGE...

VK's picture

Do you know people in the natural gas industry? A lot of them are drilling and supplying all the 'excess' gas as a result of debt repayments. They need the cash flow to keep afloat, hence they are drilling and supplying just to be in business, not as a result of some manna from heaven. 68 countries have peaked in their oil production, including hte US, the UK and Norway. Saudi Arabia appears to have peaked as well, the production profiles are available online.

curbyourrisk's picture

Bullshit on the US peaking in oil production.  If we ever changed the environmental laws here, we would have tons of new places to drill.  That arguement is crap...total crap.  Try reading up on the Bakken field...

VK's picture

Read my comment below. It's EROEI is not sufficient to justify production on the Bakken Shale, there's a reason these oil deposits have not been exploited, they are simply not worth it, in energy terms. The US is also the most drilled place on the planet and US oil production peaked in 1971. The US is producing about 45pc below it's peak, to get back to 10 million barrels per day it would require 4.5 Million barrels per day of production. That is the equivalent of half a Saudi Arabia. And current Chinese consumption.

Thermodynamics and geo-physics is a bitch but it is what it is.

curbyourrisk's picture

Oh please.  If we needed that oil, do you think we would find a way to extrude it???  You better believe it......  I don;t want to hear crap that anything is not worth drilling for.

hedgeless_horseman's picture

Extrusion is a 2D manufacturing process using metals such as aluminum. 

Oil shale is mined, not drilled for. 

Easy mistakes.  Don't let it bother you, Senator.

ATTILA THE WIMP's picture

Any good links on EROEI would be appreciated.

EscapeKey's picture

Oh god, every time an argument is had about peak oil, that old dog has to be dragged back out again.

- Bakken net energy is bad.

- Profitable shale oil production still hasn't occoured on a large scale.

- Significant engineering challenges exists in this area.

- Absolutely no infrastructure in place.

- Ultimately recoverable from the Bakken field is 3.5bbl. US oil consumption is around 20mbpd, so Bakken should cover the US for around 425 days. If you consider the world, then divide this figure by 4.

 

 

Citxmech's picture

And don't forget that to process that crap you need LOTS of water - that we don't have...  along with places to safely store all the toxic shit that's left over.

greyghost's picture

curb....yes and didn't the usgs find the oil in trillions of barrels???? how big is the field bp blew a gasket on? have they had time to get the figures from the monster field off the coast of brazil????

EscapeKey's picture

The field off Brazil delivered an estimate of 25bbl probable. But this is an early estimate, and Petrobras SPECIFICALLY SAID not to quote this figure. 25bbl is a supergiant, but the extraction costs will be huge. 25bbl = 25x11 = 175 days global supply.

And stop quoting bullshit Bakken figures. Head over to wikipedia to educate yourself.

An April 2008 USGS report estimated the amount of technically recoverable oil within the Bakken Formation at 3.0 to 4.3 billion barrels (680,000,000 m3), with a mean of 3.65 billion

http://en.wikipedia.org/wiki/Bakken_Formation

DarkAgeAhead's picture

google biophysical economics or emergy.  then check out Tainter, Homer Dixon, et. al for why societies collapse.

as another posted, it's about EROI as much as anything.

Citxmech's picture

+1 on Tainter. 

It's ALL about EROI - every specialized system we employ is subject to the reality of marginally declining returns on our investments.

DarkAgeAhead's picture

Absolutely!  And his insights on complexity are dead on.  All of our complex systems that run on oil...soon won't.  Forced simplicity and entropy shall slow us down.

I think we can only hope to decelerate gracefully, to some relatively benign or functionally restorative system like that of colonial agrarianism or the managed ecology of indigenous people.  Plus whatever basic technology is required for life...

If we continue to overshoot, the worse of a hit we'll take from the collapsing immensity of dying life.  Wait too long, and we're back to earlier Dark Ages.

But not sure what's all that worse than the corporate fuedalism and ecologic outsourcing we're living now.

tmosley's picture

Understand that peak oil in the US is not so much because we have run out of easily accessible oil, but rather because environmental regulations and NIMBY have made domestic exploration more costly than it would be naturally.  Our oil production will rise again after the current regulatory scheme collapses.

Money Squid's picture

In the late 50s Hubbert King called the peak oil production in the US to be in 70-72, and he was right, the US production has been in decline ever since. Had nothing to do with environmental laws or NIMBY, but the behavior of the oil reseviors. Its easier to predict peak oil with accurate data, but the data is manipulated. The reserves of the producers are hidden, the actual price is false (as claimed by "Another"), the entire western petroleum industry is part and parcel with the military-industrial-banking-intelligence-political system. I would simply like to know the true cost of oil. Matt Simmons "Twilight In The Desert," Abdulhay Yahya Zalloum ""Oil Crusaders," James R. Norman "The Oil Card," and David E. Spiro "The Hidden Hand of American Hegemony, Petrodollar Recycling and International Markets" are able to give some insight in to the comprehensive manipulation of the data from exploration, production, refining, distribution and consumption. The basic data available is so rotten I do not see how one can obtain a clear understanding of what is actually happening. But, if you look at just the basics, we see the cost oil rising, consumption increasing, the difficulty in finding new fields increasing, there are only smaller, less economically feasibile fields, the technical challenges in drilling and production increasing, but there is no need to build new refining capacity because there is simply not enough oil to refine to keep the existing facilities operating at full capacity. That is the key. Not only are none of the majors planning or buidling a new refinery, they are shutting down refining capacity.

trav7777's picture

This is the dumbest post yet!

IDIOT...US oil production peaked in 1970, LONG before any of this NIMBY shit.

our oil production WILL NOT RISE, we are on a 40-year track of nearly unabated decline!  The only blip was the coming online of the Prudhoe/N. Slope complex...and even this supergiant field DID NOT REVERSE the trend.

We are truly lost if idiots like you are in abundance...