Culture Change e-Letter #88 February 2005 by Jan Lundberg (Jan Lundberg is founder of www.CultureChange.org and has appeared on my Connections radio program - I've posted this article, on my site, with Jan's permission) Ten oil supply basics vis-á-vis Peak Oil and sudden shortage [originally developed for the Campaign Against the Plastic Plague, Feb. 2005] - Daily world demand of oil is over 80 million barrels a day, and approximately one quarter of this is in and by the U.S. - Half the oil refined in the U.S. is made into gasoline, the main product a refiner is concerned with. Other products such as asphalt, pesticides and plastics are minor parts of the crude-oil barrel to be disposed of (profitably only if possible). [source: Jan Lundberg, veteran petroleum industry analyst] - World oil supplies are at the approximate historic peak of maximum production, due to depletion setting in. Oil production in 18 producer countries has passed its peak and is declining faster than previously thought: at about 1.14 million barrels a day. [Adam Porter, Aljazeerah] - The maximum possible production-capacity utilization is the order of the day among the petroleum exporting countries: "The planet is operating at anywhere from 95% to 99% capacity. There is no margin for error. The only way the system can respond is continued price increases." [ Stephen Leeb, Wall Street investment advisor and author.] At a time of no spare refinery capacity, demand has outstripped all expectations. [Aljazeera.net] - Regarding rising world demand, "China and India use the energy-equivalent of 5.5 barrels of oil per person per year, while rich nations use 39. No matter how rosy your thinking is as to the global supply of oil, there is no way there is going to be enough to satisfy the demands of an extra 2.3 billion people coming online." [Forbes magazine] - U.S. oil demand is rising as well: "U.S. petroleum demand in 2004 grew at its strongest rate in five years." The system is straining: "Refinery utilization rate last year was the highest annual rate in six years at 92.8 percent of capacity." [American Petroleum Institute] - The world trend in declining oil extraction has been relentless for the past four decades. The approximate bell curve of petroleum extraction cannot be changed by any one big new discovery. [ASPO; Culturechange.org] - An International Energy Agency report from August 2004 indicates Saudi Arabia needs up to 800,000 barrels per day of newly discovered oil each year just to offset declining fields and maintain its current production level. - This can't happen [Jan Lundberg]. - What about renewable energy and other alternatives? They are not ready, and will never be as long as oil is king. (This is something not acknowledged by the boosters of the technofix.) The price of oil is kept under the price of most alternatives. When oil abdicates because great quantities are no longer available at affordable prices, no other fuel/material can fill oil's shoes. [Jan Lundberg, from a prediction originally published in the National Petroleum News in 1988] - The next shortage could be soon and be the last one -- that lasts and lasts, as the watershed event of passing the peak of global oil extraction could be right around the corner. The "market factor" in paralyzing the supply/distribution system, through panic-buying of crude and refined products, will usher in virtual but extreme shortage, bringing much economic activity to a halt in a matter of days. History taught us: "What the U.S. went through in 1979's oil crisis, based on the Lundberg Letter's projection of a 9% shortfall in gasoline deliveries, can happen again. The difference will be that global production of oil will be falling instead of increasing." - Jan Lundberg, at The Institute of Petroleum, London, February 17, 2003 _ _ _ _ Culture Change e-Letter #88 Here comes the nutcracker PEAK OIL IN A NUTSHELL The end of abundant, affordable oil is in sight, and the implications are colossal. About now in our hydrocarbon phase of human history, we have pulled out of the Earth approximately half of the available petroleum (crude oil and natural gas). The other half still in the ground is harder to extract and may not -- as assumed -- fuel the global economy or even provide a transition to another phase. To hope for an increase in discoveries is to turn a blind eye to the world trend in declining oil extraction which has been relentless for the past four decades. The approximate bell curve of petroleum extraction cannot be changed by any one big new discovery. Yet, the idea of "the Caspian" or any other mega-field du jour is an example of the constant hope for perpetual energy for high living in contradiction with nature. The same can be said of the dominant assumption that petroleum will be replaced by other "technologies." This ignores the overwhelming petroleum-based infrastructure we have, and neglects to account for the lesser return on energy from non-petroleum sources of energy. But, "they" (scientists, leaders, corporations) will "think of something." Another common assumption popular among "radicals" is that "the ruling elite will refuse" to allow the global economy or the lucrative capitalist system to collapse. If peak oil means we are at a half-way point, does this mean we now have years to either plan energy use or get used to recession, as claimed by many a writer on peak oil? Before the reader makes assumptions on how society may utilize the remaining store of petroleum, let me repeat what I told The Institute of Petroleum in London two years ago (on February 17, 2003): "What the world went through in 1979's oil crisis, which my former company warned of in the U.S., based on our projection of a 9% shortfall in gasoline deliveries, can happen again. The difference will be that global production of oil will be falling instead of increasing." This means that the next tough oil shortage, even if it is not acknowledged as a post-peak oil extraction phenomenon of diminishing supply, will cripple the globalized economy. Understanding of both the economics and social dynamics of collapse is rare, and even when it is present there is an absence of taking into account the "market factor" in ushering in collapse. Despite the need to be prepared for imminent, final energy shortage -- which could happen now or in several years at the latest -- people persist in focusing too much on the likely date of the passing of the peak. It is already clear that the oil industry and OPEC numbers on oil reserves are suspect. So we can simply offer a range of oft-quoted peak-oil arrival times:... http://www.rogerwendell.com/fossilfuels.html