Peak of Global Oil Production in Wall Street Journal

Posted: May 22nd, 2008 by: h2

Finally, the truth on peak oil is coming out, piece by piece. This one is on the front page of the Wall Street Journal. The words are starting to get used, which is the key. First you’ll read this in the Journal and the New York Times, then it trickles down to the rest of the newspapers, then finally it hits the television news. How they will decide to spin this basically all bad news is going to be interesting to watch, that’s for sure.

The world’s premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand.

The Paris-based International Energy Agency is in the middle of its first attempt to comprehensively assess the condition of the world’s top 400 oil fields. Its findings won’t be released until November, but the bottom line is already clear: Future crude supplies could be far tighter than previously thought.

A pessimistic supply outlook from the IEA could further rattle an oil market that already has seen crude prices rocket over $130 a barrel, double what they were a year ago. U.S. benchmark crude broke a record for the fourth day in a row, rising 3.3% Wednesday to close at $133.17 a barrel on the New York Mercantile Exchange.

For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently. Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day.

But the direction of the IEA’s work echoes the gathering supply-side gloom articulated by some Big Oil executives in recent months. A growing number of people in the industry are endorsing a version of the “peak-oil” theory: that oil production will plateau in coming years, as suppliers fail to replace depleted fields with enough fresh ones to boost overall output. All of that has prompted numerous upward revisions to long-term oil-price forecasts on Wall Street.
Energy Watchdog Warns Of Oil-Production Crunch, Wall Street Journal, May 22, 2008

This story is just a round-about way to introduce the readers to the new concepts, primary of which is that no, in fact, the tooth fairy does not exist, and money cannot make oil.

Today in the New York Times similar stories, which also lead very little room for misunderstanding, less and less every week now.

Oil prices leaped above $135 a barrel in overnight trading on Thursday, a new record that underscored the growing pressures that runaway energy prices are placing on some of the biggest names in global industry.

The Ford Motor Company, the American auto manufacturer, said on Thursday it would cut vehicle production for the rest of this year and fall short of reaching profitability in 2009, a long-held company goal. In a statement, a top Ford executive said rising gasoline prices “are having a tremendous impact on our sales, our manufacturing operations and our profitability.”

Meanwhile, Europe’s biggest airline, Air France-KLM, warned of a profound reshaping of the world airline industry caused by what it called the “explosion” in the price of oil. And American Airlines said on Wednesday that it would slash flights and begin charging passengers to check bags, part of a company effort to cut costs in the face of skyrocketing fuel prices.

A series of unsettling reports have suggested world oil supplies may not be able to keep up with future demand, a situation that could potentially lead to even higher prices.

Some investors reacted to a report on Thursday in The Wall Street Journal that the International Energy Agency, an Paris-based policy advisory group for industrialized countries, was concerned about a reduction in the long-term world supply of crude oil.
Economic Toll Mounts From High Oil Prices, May 23, 2008

The System Creaks to Attention, Bit by Painful Bit

Finally Roscoe Bartlett’s lonely voice on Peak Oil is getting heard, this Florida Senator is starting to see some, but of course not all, of the picture.

Against this backdrop I want to make clear that any oil still deep in the ground has no direct link – none – to today’s pump prices. Any oil in the ground won’t be in the marketplace for some ten years. Further, the oil companies that want to drill much closer to our shores already have leases on 33 million other acres where they haven’t even started drilling yet.

More importantly – no matter what anybody says or writes – the U.S. has only 3 percent of the world’s oil reserves while it uses 25 percent of the global supply.

In other words – and I’m using Samuelson’s terminology here – it’s “sheer stupidity” to think the U.S. can drill its way out of an energy crisis.

So, what to do?

Well, the U.S. failed in the 1970s to enact a real energy program to get us off oil. Result: Brazil runs on ethanol today, not the U.S.; Germany leads the world in solar power, not the U.S.

Meantime, the oil companies are awash in record profits – more than $155 billion last year alone – and not spending enough on refineries or alternative energy, while consumers are getting gouged at the pump.

Even worse, it took the U.S. more than 30 years to raise mileage standards on cars and trucks to a paltry 35 miles per gallon. Most of Europe – and the cars that U.S.-based manufacturers sell there – already average 43 miles per gallon. Japan is approaching 50 miles per gallon.

In other words, we are wasting billions of gallons of oil.

So, again, what to do?

Fifty percent of the oil we use goes into our transportation. It shouldn’t take a rocket scientist to realize this is where we must focus.

First, we must enact serious conservation measures, like, 40 miles per gallon for our vehicles; and, provide bigger tax breaks for hybrid cars.
Sen. Bill Nelson: It’s a delusion to think drilling will help ease current oil crisis

I skipped the parts where he blames speculators for the price hikes, sadly, they are partly to blame, and the declining US dollar is more to blame, but what is most to blame, as the IEA is going to soon be admitting in their studies, is that global demand has outstripped global supply. It’s downright comical to see all these so called ‘free market’ idiots go into total brain meltdown when they are confronted by a simple supply/demand equation. This to me proves, as if it needed proving, that what makes American leaders tick has nothing to do with rationality or consistency, and everything to do with fantasy and delusion. Of course, the more you study the free market in general, the less ‘free’ it starts to look.

Elsewhere, we see this type of thing, from the Governor of Pennsylvania:

Gov. Ed Rendell came to Bucks County Wednesday to call for nearly $1 billion in clean energy grants and conservation programs and he warned the state was on the “brink of disaster” from utility bills that could soon skyrocket.

Rendell is currently on a statewide tour to promote two pieces of legislation that he said could fix the problem, though many who attended his town hall meeting in Bensalem said they felt his proposals didn’t go far enough.

By 2025, the United States simply won’t have enough power plants to meet its needs. “It’s either conservation, or we will face total meltdown,” he said.

But after listening to all the speeches, residents like Lorraine Skala of Bensalem and Nancy Billheimer of Middletown said they still felt government officials failed to grasp the gravity of the problems that lay ahead.

“I just don’t think that they’re doing enough,” Skala said. “These are some nice first steps but we’re going to have some serious problems.”

Billheimer said most Americans fail to grasp the big picture.

“Most people see the cost of gas going up and that’s all they see,” she said. “This energy crisis will affect everyone. It will affect food prices. It will affect us all and so much of what I heard tonight just sounds like window dressing.”
Conservation or ‘total meltdown’, May 17 2008

As you can see, some of the citizens are a bit moire clear on the gravity of the issue than the Governor, who is admittedly at least ‘trying’. But why anyone expects anything of significance from most Republicans at this very very late point in US history is beyond me, there is certainly no rational reason to have such a hope.

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