It is conventional wisdom for most of the people following the peak
oil story that we still have a few years to go before the real
troubles begin. Some say 2011, others 2015 or later, but in general,
among those calculating the depletion vs. new supply balance most have
been talking about troubles starting in years rather than months.
Let=92s ponder for a second the meaning of =93peak oil.=94 Ever since the
concept was invented some 50 years ago, peak oil has meant the point
in time when world oil production increases to a level that never
again will be reached. For most of us, however, peak oil will not be a
point on a government chart, but will be the day when we drive up to a
gas station and find the tanks empty, restrictions on how much we can
buy, or more likely a price that makes us realize our lifestyles are
going to change. We can no longer afford to use our cars in the manner
that we have been doing all our lives.
In recent weeks there have been developments suggesting that the
troubles associated with peak oil may be coming faster than many
realize.
First, it is necessary to recall that world oil production has been
essentially flat for the last three years. We did hit a new nominal
=93peak=94 a couple of months back, but the increased production was minor
as compared to the forces of demand building across the world. With
production stagnant, consumption in the rich countries holding about
the same, and consumption in China, India, Russia and the Middle
Eastern oil producers surging higher, something had to give. The
=93give=94 was in those places that could afford $20 a barrel oil, but
could not afford it at $120 a barrel. For the last few years, an
increasing share of the oil flow going to poor countries has been
redirected to those that could pay the price. Outbidding the world=92s
poor is finite, however, so that at some point there simply won=92t be
enough oil going to poorer places for the richer ones to buy up.
Then we have the interesting news from the big producers. After ten
years of rapid post-Soviet growth, Russian oil production seems to
have reached a plateau. As Russian domestic consumption is rising
rapidly, there is nowhere for their exports to go but down =96 and they
are.
Next the Saudis, who after spending $100 billion or so on new oil
wells in recent years, say they will soon have the capacity to produce
12.5 million barrels a day. However, the King of Saudi Arabia
announced last week that he has decided to leave some of their oil in
the ground for the grandchildren. Somebody passed the word the Saudi
production was going down to 9 million barrels a day from 9.2 million
-- so much for the hope that the Saudis were going to keep us in our
accustomed lifestyles.
Then we have Mexican production and exports dropping faster than
predicted and Venezuela doing its best to sell its oil to anyone but
the U.S.
The most important factor, however, may be the Chinese who insist on
growing their economy at 10 or 11 percent a year. Chinese oil imports
are up 14 percent over last year in the first quarter and by almost 25
percent in March as domestic production stagnates and Beijing prepares
for the Olympics. Chinese imports for May are already looking to be
above normal.
As could be expected, given flat or dwindling world exports, and stiff
competition for the remainder, U.S. imports of crude and petroleum
products have not been keeping up during the last few weeks and U.S.
stockpiles have been dropping more than normal for the time of year.
Some say this is because our economy is slowing and we will need less
oil.
Others say ordering and refining more oil is about to pick up so that
all will be well shortly. The definitive answer to this question is
not far away, for this is the time of year when our stockpiles of
crude oil, gasoline, and distillates normally build. If the situation
stabilizes and stocks start climbing in the next few weeks, we can
relax a little for another year. This week=92s stockpile report shows
some improvement with crude inventories up, but gasoline and
distillate inventories still falling. Despite the weakening U.S.
economy, the Department of Energy still shows U.S. oil and gasoline
consumption up by nearly one percent over last year. Thus far in 2008
our crude imports are down 1.7 percent over last year and our net
imports of refined products are down by 5.2 percent.
If our stockpiles do not start to build more rapidly in the next month
or two, then watch out, for in recent years the U.S. has slowly moved
towards a just-in-time system for oil and products to lower inventory
costs. Keep in mind that much of our =93stockpile=94 is trapped in
pipelines, sitting in partially-processed tanks at refineries, and
aboard ships and barges where it is no use to the consumer. It was
only a couple of years ago that we were hours away from shortages.
There are many forces at work in the world=92s oil markets today. How
they will all balance out over the rest of the year is impossible to
tell. During the last few months, however, developments suggesting
much higher prices and shortages have come to the fore as witnessed by
the steadily increasing prices for oil and gasoline. Unless something
comes along to reverse these forces in the next few months, we are
likely to suffer very serious economic troubles before the year is
out.
Tom Whipple, Falls Church News Press
Article found at :
http://www.energybulletin.net/newswire.php?id=3D43234
Original article :
http://www.fcnp.com/national_commentary/the_peak_oil_crisis_the_case_for_200=
8_
20080424.html
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