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Forget Peak Oil, Time To Worry About Peak Oil Labor
By EconMatters
In a recent working paper, researchers at the the IMF (International Monetary Fund) attempt to reconcile the Peak Oil debate that whether resource constraints will dictate the future of oil output and prices, or advance in technology motivated by high oil price would eventually provide a solution to more production, as well as higher oil prices.
An economic model was developed incorporating both views, and identified two biggest factors contributing to the recent run-up in oil prices:
- Relative price insensitivity on the supply side - We have to point out that this IMF observation is partly due to oil production increase/decrease typically significantly lags the oil price movement.
- "Shocks to excess demand for goods and to demand for oil" due to the recent phenomenal growth from countries like China and India.
The paper also gives out this dire warning:
"....our prediction of small further increases in world oil production comes at the expense of anear doubling, permanently, of real oil prices over the coming decade. This is uncharted territory for the world economy...."
In general, various forecasts by different agencies seem to agree that world oil production will likely continue to have small increases with producers venturing out to exploit the more difficult and challenging formation.
However, what most forecasts as well as the IMF paper did not discuss is the scarce human capital that's already seriously plaguing the oil industry, which could have serious implication in the future oil production and technology development.
With the aging and retirement of the boomer generations that began their careers in the late 1970s (see chart below), the oil industry is suffering an acute shortage of experienced skilled professionals.
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Chart Source: Schlumberger presentation, March 1, 2012 |
This will only add to the cost of an oil barrel and become very disruptive (see graph below) as oil projects are getting more complex, more difficult and expensive to execute.
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Chart Source: Schlumberger presentation, March 1, 2012 |
A separate study by the Petroleum Human Resources Council estimates about 39,000 workers will be needed in Canada alone to replace those who are expected to retire before 2020 just to maintain the status quo. The industry could need as many as 130,000 new hires by the end of the decade with more bullish oil and gas prices.
Already at least one analyst firm is scaling back its drilling activity forecast for 2012, in part because there aren't enough workers who can drill big, complicated wells. For now, NES Global Talent sees a depletion of skilled workers in oil and gas fields in the United States, Great Britain and Australia, three of the busiest oil and gas regions, will become a major problem.
Schlumberger, the largest oilfield services company in the world, sees significant negative effect from peak oil labor manifesting by 2015, a short three years from now, with increasing inexperienced oil professionals, and that the talent problem will only get worse.
For now, most forecasts expect crude prices would remain high in 2012, mostly due to the Iran tension. Meanwhile, OPEC just revised its 2012 world oil demand outlook slightly upwards citing a stable US economy and the shutdown of nuclear plants in Japan. So if the IMF prediction comes true, it seems the peak oil labor could be just enough to tip the scale for doubling in oil price scenario a lot sooner than year 2022.
The future will not be easy.
Further Reading - Another Oil Price Shock, Another Global Recession?
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It was roughly the world population before the fossil fuel orgy....
The official footnotes for all Zero Hedge posts are at the very bottom of the site.
Just go look.
We'll wait.
A.) There is plenty of liquid fuels for the things we need to do, just not for all the other things we want to do. Pricing is good at sorting out the difference between the two.
B.) "Lack of growth does that" ...No it doesn't.
Then we need to band together, all of us, every last member of at lesdt or country, stop bickering, and get shit done. At least some of us need to. The last couple of years haven't been kind to me at all, but for whatever reason I think I myself, will be okay in the short medium term and I'm ready to kick some ass. Or work really hard to help solve our problems. If what you are saying is true, and I do believe it but not sure about the time frame, we have no choice. It's never too late.
Keep drinking the coolaid. Sure. Sure. It takes a village. Who said that? Your favorite politician? Okay. You might just get another chance to vote for your extinction yet. Meanwhile, people who learn to be self-sufficient will go about their business, understanding long ago that government has become OBSOLETE.
Self-sufficiency is virtually a myth in human history. VERY FEW are those who can truly survive by themselves without force of law to protect their land. The zero government movement is ridiculous. Saying we need limited, extremely limited government is reasonable. Or you could use a different word, society, neighbors whatever. But really without force of law nobody is self-sufficient unless you are living in the middle of nowhere with no other people around Grizzly Adams style and even he went into town to get supplies.
Otherwise people WILL work together and they WILL kill you and take your crops, animals, goods. But you didn't really mean by yourself, you meant you and your family or maybe you and your family and friends and maybe their friends too. Guess what that's society and once you guys don't have the government making laws you will eventually have conflicts at which point you will have to come to some sort of agreement on what to do about the conflict. Then what? Then you have limited government that's what.
It's really quite plain, without a doubt.
"I know where temptations lies, inside of your heart."-Lou Reed
hydroelectric power is limited by a numer of boundary conditions, ie water don't run in the desert and you can't dam every stream and it doesn't generate enough electricity to meet demand, but other than that it seems perfrctly feasible.
Say how do we get a hydroelectric dam on a jet turbine? can we store several million gallons of water on every jet making transatlantic flights?
Where do we get all this fresh water from again?
The mind boggles at what some people think.
Slum-burger (rhymes with hamburger) receives thousands of resumes for its engineering positions and responds to only a small percentage of them. I find it difficult to believe that there is any legitimate shortage of labour. Heaven forbid, if there's a labour shorage, Slum-burger might have to clean up some of the practices in the industry that have driven many people out. Like the 'macho' culture, for instance.
I don't think they will let you use your iPad and text on your iPhone while working on a rig. Potential labor pool is quite small (those pysically able to lift something or turn a valve).
nm