Official recognition of the peak oil threat has been muted up until now, couched in warnings about “adequate investment” and blithe assertions that demand would soon peak, averting any supply shortage. All that seems to have changed in the last month with a sudden deluge of reports and summit meetings suggesting that the oil industry and energy officials are now taking peak oil very seriously indeed. Words: 990
In further edited excerpts from the original article* Chris Nelder (www.EnergyAndCapital.com) goes on to say:
UK Task Force on Peak Oil: Shortages by 2015
The first bombshell was actually dropped on February 10, when the UK Industry Task Force on Peak Oil and Energy Security issued a report called “The Oil Crunch: A wake-up call for the UK economy.” It was a stern warning that “oil shortages, insecurity of supply and price volatility will destabilise economic, political, and social activity potentially by 2015.” The task force comprised top UK executives and energy experts and the report was personally endorsed by Sir Richard Branson.
The British government, including energy minister Lord Hunt, responded by staging a closed-door summit meeting with the taskforce on March 22. As the UK’s Guardian reported, the government intended to develop an action plan to contend with a near-term peak, and to “calm rising fears over peak oil.”
Veteran peak oil analyst and taskforce member Jeremy Leggett explained: “Government has gone from the BP position — ’40 years of supply left, the price mechanism works, no need to worry’ — to ‘crikey’.” He urged the assembly to properly assess the risks of peak oil, and to immediately begin preparing for the end of globalization and an era of oil shortages in the West.
According to reports from attendees, the summit yielded some important conclusions:
1. Peak oil is either here, or close enough.
2. Prices will have to go higher as demand outstrips supply.
3. Governments will be forced to intervene to maintain critical levels of oil supply, and limit volatility.
4. Rationing measures may be unavoidable.
5. Electrification of transport must be pursued in order to reduce demand.
6. Communities will need to work quickly to reorganize around walking instead of driving, producing food and energy locally instead of importing, and generally try to reduce their need for oil.
The notion that peak oil will mean the end of economic growth, however, apparently fell on deaf ears. Still, the very fact that the government has engaged with the peak oil community and formed a parliamentary group to study the issue offers a sliver of hope that, at least in the UK, we’ll have some measure of consciousness about the issue and an idea of what to do about it as we drive off the peak oil cliff.
Kuwait Report: Peak by 2014
The next bombshell were the findings of a report that surfaced around March 12 by three authors from the College of Engineering and Petroleum at Kuwait University. They applied advanced mathematics to reserve and production data for the top 47 oil producing countries using a multi-cycle Hubbert model which demonstrated a much better fit to historical data than single-cycle Hubbert Curve analyses. What made this report interesting was that first, it was from Kuwait; and second, it brought a new level of mathematical rigor to the study.
The model estimates that:
1. the world’s ultimate crude oil production will peak in 2014 around 79 mbpd.
2. the annual depletion rate of world reserves was estimated to be around 2.1%.
3. non-OPEC production peaked in 2006 at 39.6 mbpd.
4. OPEC production will peak in 2026 at 53 mbpd with the majority of the increase coming from Iraq, Kuwait, and the United Arab Emirates.
5. OPEC production is expected to decline to 29 mbpd by 2050.
ConocoPhillips: Pursuing New Oil Reserves Not Worth While
On March 25, ConocoPhillips (COP) CEO Jim Mulva admitted that pursuing new oil reserves just doesn’t pay. The remaining resources have become too marginal and too expensive, and the competition for them has become too intense. As such, Conoco has decided to sell $10 billion worth of its assets over the next two years, all of them in the marginal category, and concentrate on producing its core assets using the proceeds to buy back its stock, reduce its debt, and raise dividends — just as rival ExxonMobil (XOM) has been doing for the last five years or so.
Oxford Report: Reserves Exaggerated by One Third
On March 22, another bombshell exploded in the press as former UK chief scientist David King and researchers from Oxford University released a paper claiming that the world’s oil reserves had been “exaggerated by up to a third,” principally by OPEC.
Specifically, the report maintains that:
1. conventional oil reserves stand at just 850-900 billion barrels — not the 1,150-1,350 billion barrels that are officially claimed by oil producers and accepted by the politically influenced IEA.
2. demand could outstrip supply by 2014-2015.
3. the belief that alternative fuels such as biofuels could mitigate oil supply shortages and eventually replace fossil fuels is a pie in the sky. Instead of relying on those silver bullet solutions, we have to make better use of the remaining resources by improving efficiency.
The future of fuel will indeed be all about efficiency and alternative energy. This process is well underway. Hundreds of billions will be made as a select group of companies slowly eradicate the rampant waste in our electricity distribution system, which has been estimated at upwards of 60% by analysts.
*http://seekingalpha.com/article/196876-officials-wake-up-to-peak-oil?source=email (Visit Energy and Capital to sign up for their free e-letter.)
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