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  • From: Tompkins County Relocalization Project <tcrp-news AT lists.ibiblio.org>
  • To: tcrp-news AT lists.ibiblio.org
  • Subject: [tcrp-news] fw: It's official - cheap oil era is over
  • Date: Mon, 15 Jun 2009 07:57:02 -0400

"So here's the headline for you: for the first time, the
well-respected EIA appears to be joining with those experts who
have long argued that the era of cheap and plentiful oil is
drawing to a close. Almost as notable, when it comes to news, the
2009 report highlights Asia's growing demand for energy and
suggests that China is moving ever closer to the point at which it
will overtake the United States as the world's number one energy
consumer. Clearly, a new era of cutthroat energy competition is on
us."

==================================================================

Asia Times
Jun 16, 2009
It's official - cheap oil era is over
By Michael T Klare

Every summer, the Energy Information Administration of the US
Department of Energy issues its International Energy Outlook
(IEO), a jam-packed compendium of data and analysis on the
evolving world energy equation. For those with the background to
interpret its key statistical findings, the release of the IEO can
provide a unique opportunity to gauge important shifts in global
energy trends, much as reports of routine communist party
functions in the party journal Pravda once provided America's
Kremlin watchers with insights into changes in the Soviet Union's
top leadership circle.

As it happens, the recent release of the 2009 IEO has provided
energy watchers with a feast of significant revelations. By far
the most significant disclosure: the IEO predicts a sharp drop in
projected future world oil output (compared with previous
expectations) and a corresponding increase in reliance on what are
called "unconventional fuels" - oil sands, ultra-deep oil, shale
oil and biofuels.

So here's the headline for you: for the first time, the
well-respected EIA appears to be joining with those experts who
have long argued that the era of cheap and plentiful oil is
drawing to a close. Almost as notable, when it comes to news, the
2009 report highlights Asia's growing demand for energy and
suggests that China is moving ever closer to the point at which it
will overtake the United States as the world's number one energy
consumer. Clearly, a new era of cutthroat energy competition is on
us.

PEAK OIL BECOMES THE NEW NORM

As recently as 2007, the IEO projected that the global production
of conventional oil (the stuff that comes gushing out of the
ground in liquid form) would reach 107.2 million barrels per day
in 2030, a substantial increase from the 81.5 million barrels
produced in 2006.

Now, in 2009, the latest edition of the report has grimly dropped
that projected 2030 figure to just 93.1 million barrels per day -
in future-output terms, an eye-popping decline of 14.1 million
expected barrels per day.

Even when you add in the 2009 report's projection of a larger
increase than once expected in the output of unconventional fuels,
you still end up with a net projected decline of 11.1 million
barrels per day in the global supply of liquid fuels (when
compared with the IEO's soaring 2007 projected figures). What does
this decline signify - other than growing pessimism by energy
experts when it comes to the international supply of petroleum
liquids?

Very simply, it indicates that the usually optimistic analysts at
the Department of Energy now believe global fuel supplies will
simply not be able to keep pace with rising world energy
demands. For years now, assorted petroleum geologists and other
energy types have been warning that world oil output is
approaching a maximum sustainable daily level - a peak - and will
subsequently go into decline, possibly producing global economic
chaos. Whatever the timing of the arrival of peak oil's actual
peak, there is growing agreement that we have, at last, made it
into peak-oil territory, if not yet to the moment of irreversible
decline.

Until recently, Energy Information Administration officials
scoffed at the notion that a peak in global oil output was
imminent or that we should anticipate a contraction in the future
availability of petroleum any time soon. "[We] expect conventional
oil to peak closer to the middle than to the beginning of the 21st
century," the 2004 IEO report stated emphatically.

Consistent with this view, the Energy Information Administration
reported one year later that global production would reach a
staggering 122.2 million barrels per day in 2025, more than 50%
above the 2002 level of 80.0 million barrels per day. This was
about as close to an explicit rejection of peak oil that you could
get from the Energy Information Administration's experts.

WHERE DID ALL THE OIL GO?

Now, let's turn back to the 2009 edition. In 2025, according to
this new report, world liquids output, conventional and
unconventional, will reach only a relatively dismal 101.1 million
barrels per day. Worse yet, conventional oil output will be just
89.6 million barrels per day. In Energy Information Administration
terms, this is pure gloom and doom, about as deeply pessimistic
when it comes to the world's future oil output capacity as you're
likely to get.

The agency's experts claim, however, that this will not prove
quite the challenge it might seem because they have also revised
downward their projections of future energy demand. Back in 2005,
they were projecting world oil consumption in 2025 at 119.2
million barrels per day, just below anticipated output at that
time. This year - and we should all theoretically breathe a deep
sigh of relief - the report projects that 2025 figure at only
101.1 million barrels per day, conveniently just what the world is
expected to produce at that time. If this actually proves the
case, then oil prices will presumably remain within a manageable
range.

In fact, the consumption part of this equation seems like the less
reliable calculation, especially if economic growth continues at
anything like its recent pace in China and India. Indeed, all
evidence suggests that growth in these countries will resume its
pre-crisis pace by the end of 2009 or early 2010. Under those
circumstances, global oil demand will eventually outpace supply,
driving up prices again and threatening recurring and potentially
disastrous economic disorders - possibly on the scale of the
present global economic meltdown.

To have the slightest chance of averting such disasters means
seeing a sharp rise in unconventional fuel output. Such fuels
include Canadian oil sands, Venezuelan extra-heavy oil,
deep-offshore oil, Arctic oil, shale oil, liquids derived from
coal (coal-to-liquids or CTL), and biofuels. At present, these
cumulatively constitute only about 4% of the world's liquid fuel
supply but are expected to reach nearly 13% by 2030. All told,
according to estimates in the new IEO report, unconventional
liquid production will reach an estimated 13.4 million barrels per
day in 2030, up from a projected 9.7 million barrels in the 2008
edition.

But for an expansion on this scale to occur, whole new industries
will have to be created to manufacture such fuels at a cost of
several trillion dollars. This undertaking, in turn, is provoking
a wide-ranging debate over the environmental consequences of
producing such fuels.

For example, any significant increase in biofuels use - assuming
such fuels were produced by chemical means rather than, as now, by
cooking - could substantially reduce emissions of carbon dioxide
and other greenhouse gases, actually slowing the tempo of future
climate change. On the other hand, any increase in the production
of Canadian oil sands, Venezuelan extra-heavy oil, and Rocky
Mountain shale oil will entail energy-intensive activities at
staggering levels, sure to emit vast amounts of CO2, which might
more than cancel out any gains from the biofuels.

In addition, increased biofuels production risks the diversion of
vast tracts of arable land from the crucial cultivation of basic
food staples to the manufacture of transportation fuel. If, as is
likely, oil prices continue to rise, expect it to be ever more
attractive for farmers to grow more corn and other crops for
eventual conversion to transportation fuels, which means rises in
food costs that could price basics out of the range of the very
poor, while stretching working families to the limit. As in May
and June of 2008, when food riots spread across the planet in
response to high food prices - caused, in part, by the diversion
of vast amounts of corn acreage to biofuel production - this could
well lead to mass unrest and mass starvation.

A HEAVY ENERGY FOOTPRINT

The geopolitical implications of this transformation could well be
striking. Among other developments, the global clout of Canada,
Venezuela, and Brazil - all key producers of unconventional fuels
- is bound to be strengthened.

Canada is becoming increasingly important as the world's leading
producer of oil sands, or bitumen - a thick, gooey, viscous
material that must be dug out of the ground and treated in various
energy-intensive ways before it can be converted into synthetic
petroleum fuel (synfuel). According to the IEO report, oil sands
production, now at 1.3 million barrels a day and barely
profitable, could hit the 4.4 million barrel mark (or even,
according to the most optimistic scenarios, 6.5 million barrels)
by 2030.

Given the IEA's new projections, this would represent an
extraordinary addition to global energy supplies just when key
sources of conventional oil in places like Mexico and the North
Sea are expected to suffer severe declines. The extraction of oil
sands, however, could prove a pollution disaster of the first
order. For one thing, remarkable infusions of old-style energy are
needed to extract this new energy, huge forest tracts would have
to be cleared, and vast quantities of water used for the steam
necessary to dislodge the buried goo (just as the equivalent of
"peak water" may be arriving).

What this means is that the accelerated production of oil sands is
sure to be linked to environmental despoliation, pollution, and
global warming. There is considerable doubt that Canadian
officials and the general public will, in the end, be willing to
pay the economic and environmental price involved. In other words,
whatever the IEA may project now, no one can know whether synfuels
will really be available in the necessary quantities 15 or 20
years down the road.

Venezuela has long been an important source of crude oil for the
United States, generating much of the revenue used by President
Hugo Chavez to sustain his social experiments at home and an
ambitious anti-American political agenda abroad. In the coming
years, however, its production of conventional petroleum is
expected to fall, leaving the country increasingly reliant on the
exploitation of large deposits of bitumen in the eastern Orinoco
River basin.

Just to develop these "extra-heavy oil" deposits will require
significant financial and energy investments and, as with Canadian
oil sands, the environmental impact could be
devastating. Nevertheless, successful development of these
deposits could prove an economic bonanza for Venezuela.

The big winner in these grim energy sweepstakes, however, is
likely to be Brazil. Already a major producer of ethanol, it is
expected to see a huge increase in unconventional oil output once
its new ultra-deep fields in the "subsalt" Campos and Santos
basins come on-line. These are massive offshore oil deposits
buried beneath thick layers of salt some 160 kilometers off the
coast of Rio de Janeiro and several kilometers beneath the ocean's
surface.

When the substantial technical challenges to exploiting these
undersea fields are overcome, Brazil's output could soar by as
much as three million barrels per day. By 2030, Brazil should be a
major player in the world energy equation, having succeeded
Venezuela as South America's leading petroleum producer.

NEW POWERS, NEW PROBLEMS

The IEO report hints at other geopolitical changes occurring in
the global energy landscape, especially an expected stunning
increase in the share of the global energy supply consumed in Asia
and a corresponding decline by the United States, Japan, and other
"First World" powers. In 1990, the developing nations of Asia and
the Middle East accounted for only 17% of world energy
consumption; by 2030, that number, the report suggests, should
reach 41%, matching that of the major First World powers.

All recent editions of the report have predicted that China would
eventually overtake the United States as number one energy
consumer. What's notable is how quickly the 2009 edition expects
that to happen. The 2006 report had China assuming the leadership
position in a 2026-2030 timeframe; in 2007, it was 2021-2024; in
2008, it was 2016-2020. This year, the Energy Information
Administration is projecting that China will overtake the United
States between 2010 and 2014.

It's easy enough to overlook these shifting estimates, since the
reports don't emphasize how they have changed from year to
year. What they suggest, however, is that the US will face ever
fiercer competition from China in the global struggle to secure
adequate supplies of energy to meet national needs.

Given what we have learned about the dwindling prospects for
adequate future oil supplies, we are sure to face increased
geopolitical competition and strife between the two countries in
those few areas that are capable of producing additional
quantities of oil (and undoubtedly genuine desperation among many
other countries with far less resources and power).

And much else follows: as the world's leading energy consumer,
Beijing will undoubtedly play a far more critical role in setting
international energy policies and prices, undercutting the pivotal
role long played by Washington. It is not hard to imagine, then,
that major oil producers in the Middle East and Africa will see it
as in their interest to deepen political and economic ties with
China at the expense of the United States. China can also be
expected to maintain close ties with oil providers like Iran and
Sudan, no matter how this clashes with American foreign policy
objectives.

At first glance, the IEO for 2009 hardly looks different from
previous editions: a tedious compendium of tables and text on
global energy trends. Looked at another way, however, it trumpets
the headlines of the future - and their news is not comforting.

The global energy equation is changing rapidly, and with it is
likely to come great power competition, economic peril, rising
starvation, growing unrest, environmental disaster, and shrinking
energy supplies, no matter what steps are taken. No doubt the 2010
edition of the report and those that follow will reveal far more,
but the new trends in energy on the planet are already
increasingly evident - and unsettling.

==

Michael T Klare is a professor of peace and world security studies
at Hampshire College in Amherst, Massachusetts, and the author,
most recently, of Rising Powers, Shrinking Planet: The New
Geopolitics of Energy (Henry Holt).





  • [tcrp-news] fw: It's official - cheap oil era is over, Tompkins County Relocalization Project, 06/15/2009

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