YOUR SAY: Oil, Blood and Money

Posted on October 21, 2010 by


 

BY IAN LONGFIELD

 

 

The Association for the Study of Peak Oil and Gas (ASPO) have just wrapped up their annual US conference with the general consensus emerging that 2005 marked world peak oil production and is unlikely to be beaten. While the decline slope in oil production may be shallow at the moment, it is likely to accelerate in the coming decade, causing massive disruption to the world economy and shifting the balance of geo-political power.

 

On the available data, it seems like the oil industry would need both a herculean investment and a huge dose of luck, to discover, produce and refine enough oil to keep the current supply of liquid fuels flowing let alone allowing for demand growth coming from China, India and other aspirational developing nations. Much of the data coming out of the OPEC countries is unreliable at best and downright unbelievable at worst.

 

Saudi Arabia in particular would have the world believe that it is a Magic Pudding of oil and that they can produce as much as they like without ever diminishing the original resource. If that is so, one wonders why it is a treasonable offence in the Kingdom to even speculate on what the actual numbers might be? Matt Simmons, who sadly passed away this year, was a longtime respected investment banker to the oil industry who found this proposition absurd. In 2005 he published Twilight in the Desert which detailed his findings after studying deep background data on Saudi oil which was based on obscure engineering data that was public. Simmons discovered that Saudi Arabia was not a special oil province and that much of the reserve numbers the Saudis have spouted was unsupportable on any accepted account ting standards that would be applied to western oil companies.

 

The production numbers of the last five years increasingly support Simmons, and other analysts, views that the world has much less recoverable oil than the consuming public has been led to believe.

 

Why is this important? Well among the speakers at ASPO’s conference was Jeff Rubin, former CIBC chief economist who claimed that “peak oil is not a geological issue, it is an economic issue.” Rubin summed this up from a historical perspective. “If we know anything about the economy over the last 40 years, we know this. Feed it cheap oil and it runs smoothly. Hit it with expensive oil and it seizes up. Every major recession since the depression has had an oil price crisis precede it”. The oil price is at the time of writing four times its historical average and while we may be blissfully unaware in Australia, the rest of the world is indeed in deep recession. It is only a matter of time before this catches up to us.

 

The United States went on an oil binge after World War Two. With the largest oil reserves in the world, they could afford to. Up until the late 1960’s, the US was self sufficient in oil, but economic growth soon outstripped the ability of the US oil industry to meet domestic demand. Imports soon became a critical input to the American economy and that trend has continued to the point where 75% of all American petroleum is imported today. Without this continual flow of imported oil at prices that consumers, business and industry are geared for, the US economy is going to be in deep trouble. Since the 2008 oil price spike (and subsequent volatility) the United States economy is indeed in a great deal of trouble. What is different this time around is that even though demand for oil is stagnant, due to the recession, the price has recovered rapidly, indicating that there is indeed supply constraints.

 

Now, if you were an American President oh say …about ten years ago and, being a former oil executive, you could see this supply constraint coming, what would you do? Ten years ago, Iraqi oil was embargoed from the world market. Some easing of the trade was allowed in the now infamous “Oil For Food” program, but this trickle was never going to be enough to arrest the steep decline that is quite foreseeable for anyone who wants to look. Matt Simmons advised George W Bush in the 2000 election campaign and Vice President Dick Cheney undertook a secretive energy inquiry as soon as they assumed office in early 2001. The full details of that inquiry have never been revealed, but Cheney famously said on delivering his conclusions “The American way of life is non-negotiable”.

 

A few months later, the terrorist attacks of September 11 gave the Bush administration a convenient reason to prosecute an ill defined “war on terror” that we were promised would not end in our lifetime. Richard Heinberg, a prominent peak oil campaigner has drawn the links together quite succinctly, however I do not necessarily subscribe to the conspiracy theory that 9/11 was a false flag attack conducted by American agents. The absolute horror of that day was so spectacular that many Americans simply gave the administration a blank cheque in terms of doing whatever was necessary to capture or kill the perpetrators. While Afghanistan was an impressive opening shot, the real strategic war was, and still is, all about securing middle-east oil and keeping it flowing into American (and Australian) SUV’s. In a post peak world, middle-east oil is the only source that can increase production and so it must be protected at all costs, even when that cost is measured in lives per gallon and barrels of blood.

 

But whose fault is this mess of financial catastrophe and endless war not to mention the environmental damage caused by oil use? That honour belongs to us, the consumers who fill our cars with a grumble about the price, or jet off to exotic locations for a few weeks of casual adventure before coming back to our oil soaked jobs and lives, and making the appropriate noises as sympathy as the news is delivered, on our big screen TV’s, that another young soldier has died fighting for our absurd demands for more, more, more…!

 

If ASPO is right and we have indeed already passed peak oil, the world is going to have to face up to some very serious challenges. These will not be easy, nor will they be popular, but we could do ourselves a great deal of harm by ignoring the warning signals that are already screaming at us to change course.

 

 

Useful Links:

 

http://aspo-usa.com/

http://www.twilightinthedesert.com

http://www.theoildrum.com

http://www.richardheinberg.com

 

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Ian Longfield has campaigned on peak oil issues since 2007 after becoming aware of the problems in 2005 at a land planning seminar. It was through his professional involvement in property development and agency that he became increasingly concerned at the pattern of urban development taking place which would leave a legacy of stranded and useless infrastructure for future generations that would have less oil than we do today.   Ian’s electrical and engineering background helped him on a search through the possible alternatives, the links between oil and climate change and the geo-political significance of oil in world affairs, culminating in the conclusion that oil depletion will affect just about every aspect of life as we know it.  In late 2009 Ian was a founding member of Transition Towns Albury-Wodonga and also commenced a degree course in Sustainable Energy Management with Murdoch University.  Ian and his wife have lived in Albury for 15 years and have three children.

 

 

 

 

 

The views in this story are those of the author and not necessarily those of Our Voice: Politics Albury-Wodonga.

 

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