US Military Warns Of Oil Shortages By 2015 With Significant Economic And Political Impact, Especially On Weak Countries, India And China

Tyler Durden's picture

A report issued by the US Joint Forces Command has a rather bleak view on US oil production, and on peak oil in general. In a foreword to the report issued by General James Mattis, he warns that "By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day." Does this mean that oil, just like in the Bush administration, is about to become a "strategic interest", which coupled with the upcoming discoveries of non-existent weapons of mass destruction, would result in some additional geopoltical tensions particularly in the middle east? With nuclear tensions between Iran and Israel already at boiling hot levels, will Uncle Sam decide to make landfall in the Persian Gulg once again? More from the General: "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." Well, Mr. Chanos, there's your catalyst. We just hope that the negative carry of a five year short position is palatable to your LPs.

Some additional perspectives from The Guardian:

Lionel Badal, a post-graduate student at Kings College, London, who has been researching peak oil theories, said the review by the American military moves the debate on.

"It's surprising to see that the US Army, unlike the US Department of Energy, publicly warns of major oil shortages in the near-term. Now it could be interesting to know on which study the information is based on," he said.

"The Energy Information Administration (of the department of energy) has been saying for years that Peak Oil was "decades away". In light of the report from the US Joint Forces Command, is the EIA still confident of its previous highly optimistic conclusions?"

The Joint Operating Environment report paints a bleak picture of what can happen on occasions when there is serious economic upheaval. "One should not forget that the Great Depression spawned a number of totalitarian regimes that sought economic prosperity for their nations by ruthless conquest," it points out.

Full report by the Joint Operating Environment

 

h/t Mike

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reading's picture

Well, that ought to be good for 1000 points (on the spx)

 

George the baby crusher's picture

Well blow me over with a feather!

BlackBeard's picture

They forgot the G.I. before the JOE. but whatever.

Ragnarok's picture

Whoever has the gold gets the oil... it also helps to have military supremacy.

Mad Max's picture

More realistically, whoever has the oil gets the gold.  Though military might is quite a wildcard.

Ragnarok's picture

Chicken and egg thing?

wake the roach's picture

No, the purchasing power of gold is determined by the supply/price of surplus energy within an economy, just like every all tradable currencys or goods, whether it's dollar bills or a kilo of rice... Money is and always has been a representation of an individuals claim on surplus energy available within an economy, energy always comes first...

Fox Moulder's picture

Whoever has the lead (or depleted uranium) gets the oil and the gold.

Mad Max's picture

He who has enriched uranium can get more than he who has only depleted uranium.

dabug's picture

Hah!, beat u too it, posted this last night at 3am on ZH as a comment, saw it in the UK Guardian btw...major ramifications, no surprise that Sinopec inked a deal for Canadian tar sands 12hrs earlier? I believe US Army thought it was their strategic reserve...

ThreeTrees's picture

Fuck yeah.  Alberta gets to be Canada's goose that lays the Golden Egg!

bugs_'s picture

Fischer–Tropsch

Dark Helmet's picture

You just made Al Gore cry.

Mad Max's picture

Better than nothing, but not a solution.  "Peak Oil" doesn't mean we actually ran out, it means we can't pump enough to meet demand at current prices.  Enormous difference.

Cheeky Bastard's picture

Dude Fischer-Tropsch has got nothing to to with extraction of oil or availability of oil.

It is a chemical process. It helped Germany during the Hitler years to become THE strongest military power the world has ever seen[courtesy of Standard Oil] . Well, at least until the Allies joined forces. Read more about it  here.  http://en.wikipedia.org/wiki/Fischer–Tropsch_process

Mad Max's picture

I'm very familiar with F-T.  It was also used by South Africa for a while.  You need lots of coal and you waste half of it turning the other half into oil.  The resulting oil is high quality and pretty much substitutes for ordinary oil, but costs a lot to create.  If it's so wonderful why did the Nazis start running out of oil and why did they extend their forces 1000's of miles to try and obtain and control Mideast oil?

trav7777's picture

That isn't what Peak Oil means either

BobPaulson's picture

Peak means end of cheap oil, not end of all oil. 

trav7777's picture

That is not what Peak Oil means, either.

BobPaulson's picture

Are you one of those guys who say's F=ma isn't correct because it fails to consider quantum effects? Thanks for telling us what we know.

trav7777's picture

No, I'm not one of those guys at all.

I'm telling you that price does not matter.

If people decided tomorrow that we did not want to consume oil ever again, because we had magic cricket power or pixiedust and we wanted to pump it all above-ground to shoot into the sun, Peak Oil would STILL EXIST.

The rate at which we could extract oil would peak and then decline IRRESPECTIVE of the "price" we assign to it.

Are we clear now?

Peak "cheap" oil in terms of EROI was over 50 years ago.  Or maybe in the 1960s when discoveries peaked. 

I think it's important to understand what Peak Oil is and means and this whole notion of "cheap" is foolish.

Oil will be LESS available no matter the price.  Those who think, oh, well, I'll pay more for it but it'll still be there because only "cheap" oil has peaked are WRONG.

ALL oil has peaked, cheap, expensive, in between. 

augmister's picture

Peak oil is as outdated as global warming...look at the Bakkan find in North Dakota and the huge new reservoir of oil discovered off Louisiana.   The US is swimming in the black crude....We can tell the towel heads to go pound sand....but....whether we drill and refine, THAT is the question....

hedgeless_horseman's picture

I wish you were correct, but I believe that the "huge new reservoir of oil discovered off Louisiana" is little more than a month or two of US demand, and 6.6 miles down.  Going to need a long straw. 

  http://www.doomers.us/forum2/index.php/topic,52164.0.html

Matt, do you want to address this, as I know you are lurking around here somewhere?

Hulk's picture

To place quantitive perspective on these "new finds"

the world consumes a billion barrels of oil every 11.7 days...

trav7777's picture

I see a few of you guys understand Peak.

In the future, please do not talk about reserves or URR, as it confuses the rubes.  Don't talk about "cheap oil" or other irrelevancies, because the rubes have trouble understanding 2nd order problems.

The issue is not about how much oil is in the ground, it's about the rate at which we can produce it.

Given your statement about the world consuming 1Bbbl in 11.7 days, some rube might say, "oh Brazil just found 8-10Bbbl in Tupi so that's 117 days' worth of new supply and we just keep finding billions and billions more."

The problem is that Tupi cannot and will not produce 1bbpd.  In fact, it will top out around 500kbpd. 

I have tried mostly in vain to get people to accept that you cannot divide the P10 or P90 or URR or "inplace" reserves figures by desired demand to get production rate.  Wells just don't work that way.

Even if Tupi does contain 10 Bbbl...we cannot mobilize them to the surface at any old arbitrary rate.  We can only bring them up at max, 500,000 per day, and this is the peak rate, which is only sustainable for a few years in the production lifecycle.  Just because the world needs 1Bbbl every 11.7 days does not mean we can decide to suck oil out of a well at this rate.

Rubes continue to think we found another years' worth of supply each and every time some headline says we found possibly 30Bbbl somewhere 20 miles down.  When in reality, a field such as that may at MOST supply 1/80th of the current consumption.  Rather than say it gives us "another year," what it does is give us 18 minutes *per day* worth of oil.

Hulk's picture

Spot on Trav7777, I have relegated myself to only attempting to convey the most basic of info, out of frustration...

trav7777's picture

Yeah...I know that you know what the issue is.  Don't take my comment as a correction...I know you have this shit locked down.

It's a challenge, man...I've struggled with it.  Look at my other replies on this thread.

People hear that "cheap" oil has peaked and they assume, ok, well production will continue to increase, just at a higher price...that's deadassed categorically WRONG.

They hear that the US consumes 18mbpd and we just found 18Bbbl and so we've kicked the can 1000 days into the future.  And all this does is muddy the issue when Cantarell shed 2% of daily production just in the last few years.  And price goes up and people think we can just motor along except paying more at the pump.

The price is an artifact of supply and demand...people who think it's about "cheap" or whatever.

Gosh, look at Helium or Gold.  They peaked in 2002 and 2000, respectively.  Did "cheap" have anything to do with the Helium peak???  There is no such thing as "cheap" Helium because it's an artifact of alpha decay of radioactive elements (mostly U238), and is found with NG deposits.  Nobody drills Helium wells or does Helium exploration, yet it PEAKED and production has declined YoY since 2002.  Despite being primarily used for kids' balloons (though it is one of the more critically important elements because of cryogenic uses and superconducting research; MRIs need this as well as the semi industry.  PBMRs would ideally use He as a moderator and energy transfer material), it still peaked price be damned.

Hulk's picture

No problem with corrections trav7777. Only a fool holds onto incorrect knowledge.

It was my reading of Deffeyes, 4 years ago, that has me and my extended family on the (mostly) self sufficient farm track.Thank god for that slightly above dirt poor Appalachian upbringing,college math degree and Marine Corp experience. All are coming together nicely at this juncture....

Seer's picture

As noted, the issue is Peak Production.  Unfortunately, as seen all too often, people then place the blame on environmentalists for not allowing more drilling rigs etc.  Never mind that the oil companies really don't want to invest in more equipment because they know that we've really already reached Peak Demand.

Ah, "Peak Demand," now THAT'S the issue!  With the world's growth stalling and now contracting there just won't be all that need for more oil production: just look at how production numbers dropped off at the height of finanancial storm.

This is world-wide stuff.  For the local levels, States/nations, one can refer to "Peak Oil Imports."  The US is almost assuredly past this point, the point at which its oil imports decrease (mostly due to financial reasons), even though there may be sufficient supply on the world markets.

trav7777's picture

A month or two?

ROTFL.

Again, we CANNOT suck out the oil from this field at whatever rate we want to.  We consume 18mbpd in this country.  Assume that the find is 1Bbbl.  Does ANYONE here actually believe that we could produce 1Bbbl from this field over the span of 60 days?  That would be 16 Mbpd.  Or 3x the maximum production rate of the world's largest oilfield, Ghawar.

To even phrase this find in terms of a month or two of US demand is asinine and it understates the problem, which we *desperately* need rubes to grasp and get their heads around.
As long as they continue to believe that we just kicked the can down the road another month or two they will believe with strenuous wishin that we can find another billion barrels here another Bbbl there and we'll extend this into the foreseeable future.

The REALITY is that such a find in deepwater will probably produce *maybe* 200kbpd.  (bpd=barrels per day, k=kilo).

200kbpd is not 2 months' worth of needs, it's less than 20 minutes per day worth at current consumption.  The US consumes 750Kbbl per hour.  To bring another HOUR per day of production online to replace that lost elsewhere, we have to find a field or collection thereof that will produce THAT amount of oil.

When you look at the fields all over the earth, you see that a field of this size hasn't been found in over a decade.  A 750kbpd producing field is actually a relatively RARE thing.  And that's just ONE HOUR per day of our needs.

To illustrate the problem, Cantarell used to produce over 2mbpd, now it produces .5.  That means 1.5Mbpd of production was lost just in the past few years from this one field ALONE.  2 hours per day of US consumption, gone.  And we found a field in the deep Gulf that will give us back 20 minutes of that.

ALL that matters is rate of production.

 

Mad Max's picture

While most of your posts are intelligible and useful, you might get your point across better (especially to the "rubes") if you were less condescending and didn't intentionally misinterpret casual statements of others.

Can't tell if you're a geologist/geoscientist, but even if you are, you're not the only one here.

trav7777's picture

You might be right...or you might not be.

I tried the easy way so many times, man, it's laughable.

People have very strong internal unwillingness to accept PO.

A case in point is Douchinger...he'll ban people for it despite implicitly knowing that it's true.  It has to be true.  After I got banned the 2nd time from TF for PO arguments in which I told him to google Cantarell, references to that field started showing up in his tickers.  And yet, he still bans again for discussions about it and calls it a religion.  Why is that?  He has to know that it's true; it can't not be.  To claim that you can exponentially grow forever is ab initio illogical and apodictically false.  But the consequences of the oil peak are too scary for anyone who knows they live in a growth system, so you get the ostrich syndrome and people latching onto things like "cheap" oil peaking and somehow these new reserves figures "meet" the world's oil needs for X number of days, months, or years, when the reality is that they don't.

So, in the absence of that, sometimes I just go for the bludgeon and patronize people.  Better to get the truth out.  What's worse, my bedside manner or the fallout from mass delusions regarding energy availability if we fall off a Cantarell-esque production cliff?

The data I see on wells is frightening, man.  My personal forecast is for world war; I am planning to leave for S. America or something to get away from this shitstorm.  I just can't see a way so many fat self-entitled people will be able to coherently agree when there is going to be nothing but demagoguing of "speculators," "big oil," or OPEC.  There are few who are capable of understanding the problem and among those, most refuse to accept it.

Burgan is declining higher than projections.  Prudhoe did the same thing; I got out of BPT over the discrepancy between its production on 10ks and the projections they put out.  Projections were those nice, singledigit declines, and reality was 15% YoY.  Cantarell absolutely crashed.  Newer wells peak sooner and crash harder than older wells.

What that means is that all of the reserves we found in the past 10, 20 years are going to hit peak quicker than our initial models suggested and then crash production harder and faster than the models did.

So even the PO-aware models forecasting a 3-4% YoY production decline may very well be VAST underestimates of what we're staring in the face.  If Ghawar goes Cantarell or Burgan does, we're straight up finished.  I mean the lights go out, cars stop driving type finished.  WW2 rationing style finished.

When the fat people can't gas up the SUV, they're gonna be angry and our leadership is right there to blame boogeymen.

Hulk's picture

It was the Cantarell fall off that cemented my beliefs. Injected wells are really setting us up for a disaster. Well stated trav7777

velobabe's picture

can i go with you¿ on your jet plane 7777?

Mr Lennon Hendrix's picture

I wish you were correct.  You are not.  Peak oil is very real, unlike "global warming".

Mad Max's picture

Oh, if only you were right.  But all facts point to you being wrong.

C'mon, people, understand something before you deny it.  "Peak Oil" doesn't mean that we've used up the last drop on earth, it simply means that production rates cannot keep up with current and anticipated consumption rates.  No amount of oil that is 4 miles deep, 2% of the content of a hard rock, or priced at $400/bbl is going to solve this.

trav7777's picture

It doesn't matter what oil is priced at.

This is why economists struggle to grasp peak oil.

I had to try to phrase PO in a variety of ways to get my economist friend to get it.  He *assumed* that a higher price would cause more supply; that is an economics axiom.

I said that you cannot get more NET oil out of a well past-peak no matter what the price is.  No matter how cheap the credit, no matter how much dollars you print or gold you trade, it *cannot* be done.

The reason why is in order to get more nominal barrels out, you have to spend more energy to do it.  Your NET goes down at the well's peak.  You invest more input energy to maintain output.  Trading one form of energy for another.  The NET reaches a peak then declines.  Irrespective of human constructs like "price."

This sort of stuff, physical laws and physics and engineering, is apocryphal to economists.  It spits in the face of their dogma, which is that the whims of man bend reality, when every engineer knows that it doesn't matter how much the marketing department wants it, you *cannot* build the infeasible, perpetual motion, antigravity, etc., things which violate the laws of thermodynamics or other physical laws.  People can want and wish as strenuously as they desire, but it won't make the impossible possible.  Even if you have 1000 Jiminy Crickets wishing with you.

Economists, deep down, believe that if you offered cheap enough credit or money, that someone could and would invent a perpetual motion machine.  Or a way to make water yield more energy flowing downhill than it took to pump it uphill.  In fact, a lot of gov't programs are subsidies intended to make it look precisely like this is what is happening and "demonstrate" the viability of things which are fundamentally infeasible.

Economics *should* have been the study of usage of energy, but it became about money and interest and credit because the "study" was taken over by largely ignorant but heavily arrogant bankers.  And when the "great" economics treatises were hashed out, there was no reason to expect that oil production would ever peak; it had always grown.  Only one madman, Hubbert, was out there in the 50s, during the monetarist heyday, sounding an alarm.

derp's picture

http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus1&f=a

The bakken isn't going to get us back to the peak. There is a lot of oil down there but current estimates say only 2-4% is recoverable. A well in the Bakken might make 5,000 bbls in one month. We used to bring on wells that would make double that in a day, in fields with reservoirs with 30-50% recoverable. Horizontal drilling and advances in well stimulation created the recent boom in the Bakken which accounted for ~ 70 MM bbls in 7 years. That is roughly 4 days of supply for the US. The Bakken physically cannot make a difference with current extraction technology.

Rusty Shorts's picture

@ augmister,

 

LMAO, the Bakkan oil field, it's shale oil, and it's very deep, problem is, can't extract it faster than slow drip. Not feasible to extract. EROEI.

 

Peak Oil is in your face, global warming will be soon forgotten

Reflexivity's picture

"There will be blood."  - There Will Be Blood (the movie)

 

Can we really trust any news, statistics or estimates that come out of industry, government or the news media?

The bottom line is this there is either 1.) more oil than we think or 2.) less oil than we think:  No one knows anything.  Plan accordingly.  (a.k.a. plan on oil running out so the surprise is positive not negative.)

Hulk's picture

Historically, reserves have been greatly overstated as it makes the country or company look better economically. Shell oil had to pay a huge fine many years back for overstating reserves. Collapses currently in mexico and venezuela tend to confirm this

Seer's picture

There was a huge restatement of reserves by the OPEC countries in the early 80s.  It is suspected that this was done in order to allow them to export more oil- output quotas are based on reserve sizes (larger reserves mean your export quota is larger).

Buck Johnson's picture

Even if that is the case, ask yourself this.  Why is oil priced in dollars, the petrodollar?  Is it because we want a good price on oil, OR is it that since we went off the gold standard back in 1971 we needed our currency to be out their in the market.  So we made a deal with the Saudi's to price their oil in greenbacks making it that other countries have to buy greenbacks in order to buy oil.  And in so doing we where able to have large deficits and print money because we essentially exported inflation to other countries.  FOREIGN oil is being used to prop up the dollar and our economy.  If it wasn't so, we couldn't have build our military as big as it is or have a debt economy last as long as it has.  The rest of the world subsidized us for decades.  Also they had to recycle those petrodollars into our dollar denominated assets (treasuries and such). 

So lets say we have more than enough oil in those areas to supply our entire population and homes, we will essentially be like the oil states of the middle east in regard to gasoline and oil prices for the people (minus us being horribly wealthy) where gas costs 15 cents or more a gallon since their is so much of it.  How will this help maintain our economy, it won't.  And why should the rest of the oil producing countries price oil to other countries that need it in dollars if we have so much.  Lets think about it, we will have to compete with Saudi Arabia and the rest of OPEC and non-OPEC countries to sell oil.  We may say buy our oil at 80 dollars a barrel, but the countries buying it might say we will buy it for 53.33 Euros a barrel or less at 1.5 euros a dollar.  This makes us have to sell it for euros and then we have to recycle the Euros we got into the EU.  You see where I'm going, the benefit we got from having them use our currency is gone and know they (either the EU, or Russia or China or the combination of all three currencies) will benefit by having their currency become the reserve.

Hulk's picture

Still adiabatic geopol???

Hulk's picture

Silence is golden!

trav7777's picture

I like the adiabatic origin thesis...always have.

Don't make a damn bit of difference to peak.

Reserves are X, production is the derivative.  The two are unrelated.

I enter these PO arguments and at the outset, I say, assume reserves are infinite.  Peak still exists.  Peak is only the maximum extraction rate.

The trend Hubbert noticed was that Peak tended to be concomitant with the depletion of 50%.  People assume that ties reserves to peak somehow, but it was merely a correlation he saw when he developed his models (based upon that era's oil production profiles and distinct primary, 2ndary, tert extraction phases).

But dead dinos or trapped methane, what's the difference?

Mr Lennon Hendrix's picture

Matt Simmons was appointed by Dick Cheney to head the White House's Energy comittee before Bush stepped into office.  Simmons knows whats up.  Serial junkers on the loose!