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The Imminent Crash of the Oil Supply

The Imminent Crash of the Oil Supply

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Published by Dredd
Look at this graph and be afraid. It does not come from Earth First.
It does not come from the Sierra Club. It was not drawn by Socialists or Nazis or Osama Bin Laden or anyone from
Goldman-Sachs. If you are a Republican Tea-Partier, rest assured it does not come from a progressive Democrat. And
vice versa. It was drawn by the United States Department of Energy, and the United States military's Joint Forces
Command concurs with the overall picture.
Look at this graph and be afraid. It does not come from Earth First.
It does not come from the Sierra Club. It was not drawn by Socialists or Nazis or Osama Bin Laden or anyone from
Goldman-Sachs. If you are a Republican Tea-Partier, rest assured it does not come from a progressive Democrat. And
vice versa. It was drawn by the United States Department of Energy, and the United States military's Joint Forces
Command concurs with the overall picture.

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Published by: Dredd on Jul 27, 2010
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07/29/2010

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By Nicholas C. ArguimbauApril 23, 2010 "Information Clearing House" -- Look
at this graph and be afraid. It does not come from Earth First.It does not come from the Sierra Club. It was not drawn by Socialists or Nazis or Osama Bin Laden or anyone fromGoldman-Sachs. If you are a Republican Tea-Partier, rest assured it does not come from a progressive Democrat. Andvice versa. It was drawn by the United States Department of Energy, and the United States military's Joint ForcesCommand concurs with the overall picture. What does it imply? The supply of the world's most essential energy source is going off a cliff. Not in the distantfuture, but in a year and a half. Production of all liquid fuels, including oil, will drop within 20 years to half what it istoday. And the difference needs to be made up with "unidentified projects," which one of the world's leading petroleumgeologists says is just a "euphemism for rank shortage," and the world's foremost oil industry banker says is "faithbased." http://www.eia.doe.gov /conference /2009/session3 /Sweetnam.pdf  This graph was preparedfor a DOE meeting inspring, 2009. Take a goodlook at what it says,assuming it to be correct: 1`. Conventional oilwill be almost all gone in20 years, and there isnothing known to replaceit. 2.. Production of petroleum from existingconventional sources hasbeen dropping at a rateslightly over 4% per yearfor at least a year and willcontinue to do so for the indefinite future.3. The graph implies that we are past the peak of production and that there are750 billion barrels of conventional oilleft (the areas under the "conventional" portion of the graph, extrapolated to the right as an exponent ional). Assumingthat the remaining reserves were 900 billion or more at the halfway point, then we are at least 150 billion barrels, or 5years, past the midpoint. 4. Total petroleum production from all presently known sources, conventional and unconventional, will remain "flat"at approximately 83 mbpd for the next two years and then will proceed to drop for the foreseeable future, at first slowlybut by 4% per year after 2015. 5. Demand will begin to outstrip supply in 2012, and will already be 10 million barrels per day above supply in onlyfive years. The United States Joint Forces Command concurs with these specific findings. http://www.jfcom.mil /newslink/storyarchive/2010/JOE_2010_o.pdf , at 31. 10 million bpd is equivalent to half the United States' entireconsumption. To make up the difference, the world would have to find another Saudi Arabia and get it into fullproduction in five years, an impossibility. See The Oil Drum, http://www.theoildrum.com/node/5154
 
5. The production from presently existing conventional sources will plummet from its present 81 mbpd to 30 mbpdby 2030, a 63% drop in a 20-year period. 
 
6. Meeting demand requires discovering, developing, and bringing to full production 60mbpd (105-45) of "unidentifiedprojects" in the 18-year period of 2012-2030 and approximately 25 mbpd of such projects by 2020, on the basis of avery conservative estimate of only 1% annual growth in demand. The independent Oxford Institute of Energy Studieshas estimated a possible development of 6.5mbpd of such projects, including the Canadian tar sands, implying a deficitof 18-19 mbpd as compared to demand, and an approximate 14 mbpd drop in total liquid fuels production relative to2012, a 16% drop in 8 years. 7. The curve is virtually identical to one produced by geologists Colin Campbell and Jean Laherrere and published in"The End of Cheap Oil," in Scientific American, March, 1998, twelve years ago. They projected that production of petroleum from conventional sources would drop from 74 mbpd in 2003 (as compared to 84 mbpd in 2008 in the DOEgraph) and drop to 39 mbpd by 2030 (as compared to 39 mbpd by 2030 in the DOE graph!).http://www.jala.com /energy1.php . Campbell and Laherrere predicted a 2003 "peak," and the above graph implies a 'peak" (not necessarilythe actual peak, but the midpointr of production of 2005 or before. So here we are, if the graph is right, on the edge of a precipice, with no prior warning from either the industry, whichknows what it possesses, or the collective governments, which ostensibly protect the public interest. As Colin Campbell,a research geologist who has worked for many large oil companies and studied oil depletion extensively(http://www.peakoil.net/about-aspo/dr-colin-campbell) says, "The warning signals have been flying for a long time. Theyhave been plain to see, but the world turned a blind eye, and failed to read the message." http://www.greatchange.org /ov-campbell,outlook.html The world was completely transformed by oil for the duration of the twentieth century, butif the graph is right, within 20 years it will be virtually gone but our dependence upon it will not. Instead, we havezero time to plan how to replace cars in our liveszero time to plan how to manufacture and install millions of furnaces to replace home oil furnaces, and zero timetoproduce the infrastructure necessary to carry out that task zero time to retool suburbia so it can function without gasolinezero time to plan for replacement of the largest military establishment in history, almost completely dependentupon oilzero time to plan to support nine billion peolple without the "green revolution," a creation of the age of oilzero time to plan to replace oil as an essential fuel in electricity productionzero time to plan for preserving millions of miles of roads without asphalt.zero time to plan for the replacement of oil in its essential role in EVERY industry.zero time to plan for replacement of oil in its exclusive role of transporting people, agricultural produce,manufactured goods. In a world without oil that appears only twenty years away, there will be no oil-burningships transporting US grain to other countries, there will be no oil-burning airlines linking the world's major cities,there will be no oil-burning ships transporting Chinese manufactured goods to the billions now dependent on them.zero time to plan for the survival of the billions of new people expected by 2050 in the aftermath of ":peak everything."zero capital, because of failing banks ansd public and private debt, to address these issues.Why zero time?Because if we at any time use more oil than allowed by the graph, we will have even less later.. Because we are already committed to supporting 2.5 billion more people on what we have. Because every day we continue upward in our oil consmption, even though we continue to have more people whoneed it and billions who deserve to rise from abject poverty, we are making the future supply shortage worse. If you believe the graph, demand will outstrip supply starting at the end of 2011, and severely outstrip supply in fiveyears. What are we going to do, and how are we going to do it? We have no time to decide.
IS THE GRAPH RIGHT?
 It is very unlikely that things can be better than the graph indicates. Why?The great majority of authorities believe there is little more than 1 trillion barrels of conventional oil left. You canmake a simple calculation from that: At the present rate of 30 billion barrels per year, 82 million barrels per day, itwill all be gone in 33 years, and consumption has been rapidly increasing, not decreasing, so if anything it will allbe gone sooner...A closer look at the graph reveals that it was drawn on the assumption that the world's existing conventional fieldscontain only 750,000 barrels at this time, enough to keep us going only 25 years.The graph assumes a decline rate of 4% per year. As long as the estimates of remaining reserves are right, thatcan't be far off. In fact, 4% is a relatively low decline rate compared to what has been observed in oil fieldsgenerally. Hold on, it's going to be a fast ride down!The major oil companies, which presumably know better than we do how much oil is in their possession,"conspicuously fail to invest in new refining capacity, which would surely be needed if production were set torise.'" Campbell, http://www.greatchange.org/ov-campbell,outlook.html . The excess of refining capacity overdemand remained close to 10 million bpd during the nineties, but dropped to almost nothing in the last decade as aresult of failure to build new capacity. http://www.imf.org/external/pubs/ft/weo/2006/01/chp1pdf/fig1_21.pdf .The United States Joint Forces Command has also reported the failure of the oil industry to invest in the refiningcapacity necessary to permit expanded production, and that "Even were a concerted effort begun today to repairthat shortage, it would be ten years before production could catch up with expected demand." "Joint OperatingEnvironment 2010," at 26. http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf The most frequiently discussed significant source of unexploited petroleum is the tar sands of Alberta, Canada.Because a high percentage of the energy value of the tar sands has to be expended in their extraction, the reportedquantity of reserves is misleading, and two independent researchers have estimated respectively that productionfrom the tar sands by 2020 may be expected of 3.3 million bpd and 4 million bpd. Consequently, the likelihood of 
 
 
the tar sands making a significant contribution to the world's petroleum demand in the foreseeable future islow.Phil Hart and Chris Skrebowski, "Peak oil: A detailed and transparent analysis,"http://www.energybulletin.net/node/30537The shortfall, labelled "unidentified projects," that needs to be filled in 20 years is an unprecedented 60 millionbarrels per day, equivalent to 3/4 of today's total production. We have never in history done anything comparableto that. Although there are large deposits of "unconventional" oil such as the Canadian tar sands, most are makingonly slow progress at development and consume as much or more energy in their production as they can generate.The independent Oxford Institute of Energy Studies has estimated a possibe development of 6.5mbpd of suchprojects, when we'll need more than that every two years just to keep our place. So the likelihood of anything atall making a significant dent in the shortfall is small. Indeed, the "unidentified projects" can be perceived as just a"euphemism for rank shortage" (Campbell http://www.greatchange.org/ov-campbell,outlook.html) The UnitedStates Joint Forces Command has come to the similar conclusion: that of all potential future energy sources,"None of these provide much reason for optimism," http://www.jfcom.mil/newslink/storyarchive /2010/JOE_2010_o.pdf Petroleum industry investment banker Matt Simmons calls them "faith-based."http://www.simmonsco-intl.com/files/Northern%20Trust%20Bank.pdf at 4The "Hubbert Peak" theory of oil field depreciation, which predicted the peak and subsequent demise of the USoil inudtry 15 years in advance and within 2 years of its occurence http://www.hubbertpeak.com/hubbert /1956/1956.pdf , says that with normal production methods, a country reaches peak production in its oil fieldswhen they are 50% depleted, with the production curve being bell-shaped. The peak can be postponed withinnovative extraction techniques, but this only causes subsequent more rapid decline of the deposits and totalextraction if anything decreasing. The world reached the midpoint of its reserves in the last decade, so the 2005"peak" implied by the above graph is very close to what would be expected.Astonishingly, Dr. Hubbert in the same 1956 paper predicted, based upon records of only 90 billion barrels of oilhaving been recovered worldwide, that the peak of world petroleum production would be approximately the year2000; this apparently quite accurate prediction by Hubbert has largely beenforgotten. http://www.hubbertpeak.com/hubbert/1956/1956.pdf . One is tempted to ask why, if one man couldpredict the timing of the peak 44 years before it occurred, the United States Department of Energy is incapable of recognizing it after it occurred.There's a common feeling that just becase we don't know where the oil is, doesn't mean the Mother Lode isn't rightaround the corner. But if you've looked everywhere, the chances are a lot slimmer. The lag time betweendiscovery and bringing to full production of a field is 30-40 years, which means that even the virtually impossiblediscovery of another Saudi Arabia would barely change the graph above, of production between now and 2030.But no such discoveries are left to be made. The rate of discovery of new conventional oil has been steadilydropping now for FORTY years despite ever-more searching with ever-more-sophisticated technology. There havebeen two pivotal events: the peak of discovery around 1968, and the day in 1981` when discovery of new oildeposits no longer kept up with production. There is nothing complicated about this. As Campbell says, thewarning sign there for anyone to see"simply recognized two undeniable facts:You have to find oil before you can produce itProduction has to mirror discovery after a time lag"Discovery reached a peak in the 1960s - despite all the technology we hear so much about, and aworldwide search for the best prospects. It should surprise no one that the corresponding peak of productionis now upon us." Indeed, Campbell's second point means that the inevitable peaking of oil production in theearly 21st century, should have been clear for all to see since the peaking of discovery in the late sixties.Campbell does not stand alone. As the US Joint Forces Command observes, "The discovery rate for new oil andgas fields over the last two decades (with the possible exception of Brazil) provides little reason for optimism thatfuture efforts will find major new fields." "Joint Operating Environment 2010," at 31.Saudi Arabia's largest field, the Ghawar, is now in decline and it appears that the country has nothing to offset thatdecline. That has led many to conclude that "Peak Oil is a Done Deal." (Dave Cohen, ASPO/USA EnergyBulletin, July 16, 2008. http://www.energybulletin.net/node/45940 )
 
IF IT'S A "DONE DEAL," WHY DID IT TAKE UNTIL THE LAST MINUTE TO GET HERE?
 "We can wish it, we can dream it, but it will never be, oil is not renewable, and therefore in time it must be realizedthat THERE WILL BE NO OIL." ENO Petroleum Corporation, "Peak Oil - The Global Oil Crisis,"http://www.enopetroleum.com/opecoilreservers.html. It is hard to conceive of an act or omission causing more pain tomore people and creatures than the failure of "those in charge" to announce with reasonable forewarning that the oilsupply was going to crash. But it is upon us with no forewarning to the general public at all. The government planning agencies charged with helping the public survive the end of oil could not have performedworse than by recognizing peak oil only after it has happened. Like anthropogenic global warming ("AGW"), "peak oil"has been the subject of decades of denial. Notwithstanding Hubbert's famous coup in pinpointing the peak of US oilproduction through the simple observation that production naturally peaks when the supply is half gone, few would listenthat because the worldwide supply of conventional oil would reach the halfway point in the first decade of this century,trouble was right around the corner. The fact is, coming to that point meant we were in trouble regardless, because theearly stages of development of an oil field (like the early stages of growth of virtually anything else) follow anexponential growth curve, and the world's growth addicts love exponential curves, but once you get beyond the halfwaypoint, it is a mathematical certainty that the longer you attempt to conform the field to a pattern of exponential growth,the more the end is going to be precipitous. If you don't decelerate rapidly, that is precisely what has to happen - thedecline after the halfway point can only be more rapid than the rise beforehand. 

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