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SG-W:/ Fw: [energyresources] Peak Oil - the series
- Subject: SG-W:/ Fw: [energyresources] Peak Oil - the series
- From: "kermit schlansker" <email@example.com>
- Date: Fri, 14 May 2004 07:35:22 -0500
- Delivered-To: firstname.lastname@example.org
- Delivered-To: email@example.com
This is typical of the warning messages that I am getting from the
energyresources list. We need to forget environmentalism and start working
on sustainability. Theere are many things that could be done locally if
there were any understanding of the terrible catastrophe we are facing. The
first thing that has to be done is to face and talk about the problem.
Running out of energy will be forever. I am trying to write a book called
"Blueprint for Sustainability" But I am too slow.
----- Original Message -----
From: "ldcdnd" <firstname.lastname@example.org>
Sent: Thursday, May 13, 2004 8:47 PM
Subject: [energyresources] Peak Oil - the series
> Part 1
> The looming oil crisis will dwarf 1973
> Commentary: Forces converge to create worldwide woes
> By Paul Erdman, CBS.MarketWatch.com
> Last Update: 8:02 PM ET May 5, 2004
> Editor's note: This is the first in a three-part series by CBS MarketWatch
columnist Paul Erdman.
> HEALDSBURG, Calif. (CBS.MW) -- As the price of crude oil keeps rising
toward $40 a barrel and beyond, it has become increasingly clear that the
world is heading toward a major oil crisis -- in terms of both price and
supply -- that will dwarf that of 1973.
> There can be no doubt that the fall of the House of Saud would be thrust
the entire Western world into an energy crisis of unprecedented proportions.
> For many of us who have been observers of global energy trends for what
now amounts to decades, this has become not a matter of "if" but rather one
of "when." We are facing a convergence of three forces that will have a
potentially explosive effect on the market for crude oil.
> They are:
> 1. A growing geopolitical crisis in the Middle East, which is now
threatening to spread beyond Iraq to Saudi Arabia, the world's largest
producer and exporter of crude oil.
> 2. A surge in global demand for energy and particularly crude oil and its
derivatives, fueled by the recovery of both the American and Japanese
economies and the unprecedented growth of China, which has just replaced
Japan as the world's second largest consumer of crude oil.
> 3. A structural deterioration of the world's oil supply. What is involved
here is nothing short of an imminent peaking out of production of crude oil
on a global basis -- known by energy industry insiders as "Hubbert's
Peak" -- which would turn a cyclical supply/demand crisis into a structural
energy crisis of unprecedented proportions.
> This is the first a series of articles dealing with this pending crisis
and its potential impact on our economy and financial markets
> Where the role of geopolitical events on the price and supply of crude oil
is concerned, the early warning signals of a major crisis are now coming in
every week. In late April it came in the form of a terrorist attack on the
Persian Gulf oil terminal through which 90 percent of Iraq's crude oil
exports flow. The attack forced the temporary shutdown of the facility. This
event merely adds to the mounting evidence that those who have been trying
to convince us that Iraq will soon reassume its role is a major supplier of
oil to the world market -- as much as 3.5 million barrels a day this year,
and 5 million barrels per day within five years -- have been leading us down
the garden path.
> As a result of the disastrous security situation prevailing in Iraq, all
attempts at restoring the output potential of its oil field have now been
put on an indefinite hold. Even the first $20 billion dollars of funding
originally committed to needed repairs of the facilities there has been
cancelled. The sad truth is that in the foreseeable future Iraq will supply
less crude oil to the world market than it did before the war.
> But compared to what could happen inside its neighbor to the south, all
this barely deserves a footnote. The first indications that the supply of
oil from the entire Mideast may be on the edge of implosion are now
beginning to take on concrete and unmistakable form.
> I refer here to the massacre of five employees of the Swiss-based ABB who
had been contracted out to run a petrochemical a joint venture of Exxon
Mobil and Saudi Basic Industries Corp in Saudi Arabia. It was an inside job.
Their killers were Saudi nationals who worked there. This prompted the US
ambassador to Saudi Arabia to urge all US nationals -- numbering in the tens
of thousands -- to leave the country immediately, because neither the
kingdom nor the United States can guarantee their security. This represents
a retreat by the United States of historical proportions.
> Since World War II, our country has essentially acted as a protectorate of
the rulers of Saudi Arabia, the House of Saud, in return for that nation's
commitment to act as the great stabilizer of both the supply and price of
crude oil in the global market for this key commodity. Saudi Arabia is
uniquely able to play such a role, since it is universally recognized as the
world's key "swing" producer of crude oil. On average its output of 8
million barrels a day accounts for 10 percent of the world's supply of crude
petroleum, almost all of which is exported. But what is perhaps even more
significant, Saudi Arabia is in a position to increase output and exports to
11 million barrels a day almost overnight should a supply crisis occur
elsewhere in the world.
> Were, however, the rulers of this supplier of last resort be brought down
by the revolutionary forces of the Islamic Fascists whose numbers seem to be
increasing geometrically inside Saudi Arabia, their first step as the
nation's new rulers would be to suspend all oil exports, demonstrating for
all to see the ultimate power which Islam wields over the West.
> For there can be no doubt whatsoever that the fall of the House of Saud
would be thrust the entire Western world into an energy crisis of
unprecedented proportions. Lest there be any doubt about this, as Larry
Goldstein, president of the Petroleum Industry Research Foundation told the
Wall Street Journal this week: A disruption of Saudi oil supplies is "one
event to which no one has an answer."
> As will be described in the next article in this series, such a supply
crisis could hardly come at a worse time. The world's dependence on oil is
spiking with the revival of economic growth in the U.S. and Japan, and the
emergence of China as a major competitor for the limited supply of
petroleum, even as all attempts to introduce energy conservation on a major
scale have been essentially abandoned.
> Part 2
> Hubbert's Peak goes global
> Commentary: Why the coming oil crisis will be structural
> By Paul Erdman, CBS.MarketWatch.com
> Last Update: 12:01 AM ET May 13, 2004
> Editor's note: This is the second in a three-part series on oil by
MarketWatch columnist Paul Erdman. See Part 1
> HEALDSBURG, Calif. (CBS.MW) -- Before considering the effect of surging
global demand for energy on the price of crude, I would like to discuss the
potential structural change in the supply of oil.
> This change will have deep-seated implications beyond the cyclical
supply/demand crisis we are experiencing at present.
> In 1956, M. King Hubbert, an American geophysicist working at the Shell
Oil research laboratory in Houston, came up with a startling prediction: Oil
production in the United States would peak in the early 1970s, signaling the
beginning of an irreversible decline in the domestic output of crude
petroleum. This event would be merely the precursor of a peaking out of oil
production on a global scale, signaling the onset of the end of the Age of
> Almost every energy expert on earth rejected this thesis out of hand --
until the early 1970s when, indeed, exactly that happened. Output of crude
oil in this country peaked in the year 1970, and it has been falling ever
> This event has since become known in industry circles as "Hubbert's Peak."
Despite its fundamental significance where the future of our oil-based
economy was concerned, for decades it turned out to be a scientific thesis
that remained generally unknown. For those who had heard of it, it was
derided as just another of those crackpot "end of the world as we have come
to know and love it" theories that are usually espoused by gold bugs or
other doomsday prophets of the same ilk.
> That has now changed. Its acceptance by the academic world is evidenced by
the recent publication of two books dealing with this subject:
> "Hubbert's Peak: The Impending World Oil Shortage" by Kenneth. S.
Deffeyes, professor emeritus at Princeton University and a former colleague
of Hubbert at Shell.
> "Out of Gas: The End of Age of Oil" by David Goldstein, vice provost and
professor of physics at the California Institute of Technology.
> These scientists have applied the same methodology developed by Hubbert in
his analysis of the outlook for American crude oil output to world oil
production. They have come to the conclusion that global output of crude oil
now also is on the verge of peaking out and that when this happens, contrary
to all expectations, the amount of crude of oil flowing into the world
market will most probably begin fall by somewhere between 5 and 10 percent
> This conclusion runs contrary to all previously held expectations, for two
> 1. It was assumed that rapid new discoveries of oil reserves would
continue well into the 21st century, ensuring that the future supply of oil
would continue to stay well ahead of demand, just as it had during the
entire 20th century.
> 2. Aside from the impact of new discoveries, given the amount of crude
petroleum known to have been in the ground when we first started to pump
it -- roughly 2 trillion barrels -- were we to continue to pump oil and
consume it at the rate we are doing now, we will not have pumped the last
drop for at least another 40 years. And it is only at that point where the
so-called supply crisis will occur.
> Those who subscribe to Hubbert's theory tell us that both of these
expectations are dead wrong:
> 1. As regards new discoveries, they point out that the last great oil
field, the Ghawar field in Saudi Arabia with reserves of 87 billion barrels,
was discovered 45 years ago. Since then geologists have scoured the earth
searching for major new fields -- to no avail. The largest remaining
unexplored area is the South China Sea, which is considered by geologists to
be promising but not spectacular.
> But as Goldstein points out: "Let us suppose for one euphoric moment that
one more really big one is still out there to be discovered. Even if we were
to stumble onto another 90-billion barrels field tomorrow (the equivalent of
another Ghawar field) Hubbert's Peak would be delayed by a year or two, well
within the uncertainty of the present estimates of when it will occur. It
would hardly make any difference at all."
> 2. Regarding timing, the bell shape of the history of crude oil output
dictates that the supply crisis will begin in earnest not when the last drop
of oil has been pumped out of the ground sometime in the hazy future, but
rather when we have used up half the oil that existed, not all of it. Once
we have reached that halfway point, existing oil fields will start to become
exhausted faster than the new oil fields can be tapped. The rate at which
oil can be pumped out of the ground will then start to decline.
> This, as Goldstein points out. is the essence of the bell-shaped curve
hypothesis. There is a growing consensus that the crucial turning point in
output will probably occur in the second half of this decade, in or around
> The crucial remaining question is: how fast will the gap then grow between
supply and demand? All other things being equal, the decline side of the
curve will be a mirror image of the initial increase. But of course there
will be mitigating factors, such as energy conservation measures or the
development of substitutes to oil as a primary energy source, ranging from
hydrogen to nuclear to solar.
> But the odds seem overwhelming that none of this will happen in time to
head off an energy crisis that will dwarf anything we have ever experienced.
> Editor's note: The author of this series has equity positions in three
major international oil companies: ChevronTexaco, ConocoPhillips, and
> Economist and author Paul Erdman is a CBS.MarketWatch.com columnist.
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