World facing oil pricing uncertainty - “triple-digit” oil prdicted

The world’s energy ministers and oil producers are trying to agree on ways to prevent oil price spikes in the immediate future – although at least one economist is predicting “triple-digit” oil later this year.

The elite group is today (Wednesday, March 31) concluding their three-day International Energy Forum meeting in Cancun, Mexico. According to papers published ahead of the event, participants considered “demand and supply uncertainties,” having to balance Opec’s claim of spare oil capacity “exceeding 6 million barrels per day” against the claims of neutral strategic advisors PFC Energy that oil will be “peaking between 2020-2025 around 95.0 mmb/d.”

The majority of oil consuming nations are siding with Opec, according to press reports, agreeing that producers and consumers should work together to avoid a repeat of 2008’s market volatility. According to the UK Financial Times:

The change in attitude marks a significant shift in political relations between
Opec, other producers and the world’s biggest oil-consuming countries. Opec’s
efforts to control the market once made it the enemy of the US and many European
nations.

World energy briefing hears of peak oil by 2020

The world’s energy ministers are currently discussing a forecast of global oil supplies “peaking between 2020-2025.”

The International Energy Forum is the world’s largest gathering of Energy Ministers, who collectively represent “more than 90 per cent of global oil and gas supply and demand.” It is meeting March 29 –31 at the Mexican resort of Cancun. (Mexican President Felipe Calderon seen right at the opening of the forum.)

It will be considering peak oil with a document titled Unpacking Uncertainty: Investment Issues in the Petroleum Sector, written by “strategic advisors” PFC Energy, chosen to give an impartial overview of the various oil supply claims.

In the publication, PFC Energy reviews three oil supply projections: the International Energy Agency (IEA) view of “total oil demand reaching 111 mmb/d in 2030,” those of Opec, at “a slightly higher 113 mmb/d,” and its own scenario that, irrespective of demand, “global crude oil output is likely to be constrained just below 100 mmb/d.” It continues:

Oil leaders talk of 'demand and supply uncertainties'

Ministers and energy executives from up to 64 countries are meeting at the Mexican resort of Cancun – and will be talking about problems of “demand and supply uncertainties.”

The get-together is for the International Energy Forum (IEF), which runs March 29 –31. IEF is a “neutral facilitator” that allows oil producers and consumers to talk about “global energy security,” bringing together IEA and Opec countries, including key players Brazil, China, India, Mexico, Russia and South Africa.

Speaking ahead of the meeting, all parties said they wanted to avoid a repeat of 2008’s price volatility, when crude surged to a record $147 a barrel, battering consumers, before plunging to $33, which hurt the producers.

Opec will present a background paper at the meeting claiming “ample OPEC crude oil spare capacity today, exceeding 6 million barrels per day.”

However, the meeting features an intriguing item, Unpacking Uncertainty which states:

Government wakes up to peak oil

The British government is taking peak oil very seriously, according to a participant at a behind-closed-doors ministerial meeting earlier this week.

Rob Hopkins blogged about what he saw when he represented “energy descent” group Transition Network at the UK Department of Energy workshop on Monday, March 22.

It is essential reading about the “fascinating and frustrating” process of attempting to alert government to an issue that it would probably rather ignore, if it could get away with it. Hopkins (right) suggested that, in retrospect, it may be regarded “as the day when UK government finally starting to ‘get’ peak oil.”

The event – which was supposed to have been kept secret but got leaked in the press – featured four peak oil presentations: reports from both the UK Energy Research Centre and the UK Industry Taskforce on Peak Oil and Energy Security (see below), an oil industry perspective, and Hopkins’ talk about "local communities and energy efficiency"

Politicians, the market and peak oil reality

The meeting of Britain’s energy minister to review the implications of future oil scarcity is a cause for mild optimism, according to longtime peak oil writer Tom Whipple.

The former CIA analyst suggests – writing in his regular Falls Church News-Press column, printed today – wonders if this “admission by a British government, that there might be something to this peak oil business after all” makes them the first political leaders wiling “to face reality.”

The March 22 meeting followed publication of a provocative report in February by a group of leading industrialists, calling themselves the UK Industry Taskforce on Peak Oil and Energy Security. Their The Oil Crunch: a Wake-up Call for the UK Economy, states that “oil price shocks [that] have the potential to destabilise economic, political and social activity” will happen within five years. (See previous posts; this and related energy reports are linked from the Free resources page.)

Whipple knows it’s too good to be true:

Reserves exagerated by one-third; price spikes by 2014

According to the UK government’s former chief scientist, oil reserves have been massively over estimated for years – by up to one-third - and demand will likely outstrip supply as soon as 2014.

According to an item printed in the UK Daily Telegraph, Sir David King (left) – who was head of the Government Office for Science from October 2000 to 31 December 2007 – is warning of “shortages and price spikes within years.” This states:

The scientist and researchers from Oxford University argue that official figures are inflated because member countries of the oil cartel, OPEC, over-reported reserves in the 1980s when competing for global market share.

Their new research argues that estimates of conventional reserves should be downgraded from 1,150bn to 1,350bn barrels to between 850bn and 900bn barrels and claims that demand may outstrip supply as early as 2014.

The researchers claim it is an open secret that OPEC is likely to have inflated its reserves, but that the International Energy Agency (IEA), BP, the Energy Information Administration and World Oil do not take this into account in their statistics.

UK government's 'new sense of urgency' over peak oil

British ministers are today meeting industry leaders to talk about peak oil, according to a report published in the UK left-of-centre Guardian newspaper. It states:

In a significant policy shift, the government has agreed to undertake more
work on whether the UK needs to take action to avoid the massive dislocation
that could be caused by the early onset of "peak oil" – the point that marks the
start of terminal decline in global oil production.

Jeremy Leggett, the executive chairman of the renewable power company
Solar Century and a leading figure in the UK industry taskforce on peak oil and
energy security, said the meeting, to be held at the Energy Institute, showed a
welcome new sense of urgency.

"Government has gone from the BP position – '40 years of supply left,
the price mechanism works, no need to worry' – to 'crikey'," he said. "BP and
others are telling us that, but you lot, Virgin, Scottish and Southern, and
others are telling us something completely different. We do not know who to
believe. Let's do a proper risk assessment with industry," he said

It seems to follow on from media coverage of two recent issues:

'Production has already peaked' - Heinberg

There are some interesting comment in today’s National Post (a national Canadian right-of-centre paper) by peak oil Richard Heinberg that suggest oil might have already peaked. This is what he has to say:

So far, the record year for world crude production was 2005, and the record
month was July 2008. Tellingly, the leveling-off of extraction rates between
2005 and 2008 occurred in the context of rising oil prices; indeed, in July
2008, the price spiked 50% higher than the previous inflation-adjusted record,
set in the 1970s. Yet as both oil demand and prices rose, production barely
budged in response.

While many commentators believe the jury is still out on Peak Oil, the
list of petroleum analysts who say world oil production has already peaked, or
will do so in the next five years, lengthens almost daily, and includes CEOs and
other well-placed leaders within the oil industry.

But it's his call for action – tucked away in the final two paragraphs – that is so offensive to many of the

Crisis 2014

I've been thinking for a while that the ongoing global recession is delaying the onset of peak oil, and so could be considered a good thing - in the sense that it's bought us some time, and delivered a rather painful wake-up message to many.

Before this slowdown, peak had been estimated to kick in sometime between 2011 and 2012. The latest thinking is that things will start to get chaotic anytime after 2013.

This figure comes from "retired government analyst" - he's ex-CIA - and longtime peak oil writer Tom Whipple, writing in today's Falls Church News-Press (and I know you're thinking, where? It's a community newspaper that serves a town in Virginia - and it's covering an issue that none of the majors would!) As Whipple tells it, the world is currently producing 86 million barrels a day. The capacity to produce oil is still greater than demand - around five to six million barrels a day greater, thanks to new fields coming into production. For now.

The problem is that existing fields are depleting at the rate of four million barrels a day, and there are no new fields apparent.

Sex, drugs and peak oil?

Peak oil writer James Howard Kunstler is the new Hunter S Thompson, according to Joe Bageant.

Is peak oil the new Fear and Loathing?

For anyone unfamiliar with Bageant, he’s probably the web’s finest left-of-centre political writer. He could be compared to PJ O’Rourke; Bageant is not as left as he claims, just as the Republican Party Reptile is a lot more liberal than he lets on. I love Bageant because he’s so righteous, and O’Rourke because he’s so un-righteous.

Anyway, this is Bageant’s take on Kunstler: “Writers in the gonzo-esque mold? I really don't know any more than you do on that matter. I'd say James Howard Kunstler for one. You may not think of Jim that way, but if he were writing his stuff in 1970, he would have been seen as gonzo.”

And while you are at it check out the Hunter S Thompson motivational posters. Print one for your workplace.

The $150 billion bottle of beer

We tend to think of the Weimar Republic when we consider hyperinflation, but that is a dangerously loaded topic. There is a more recent, and more easilty understood example: the Zimbabwean dollar. Introduced in 1980, at the time it was one of the highest value currency units – one dollar was worth $1.49 US.

That was then. By July 4, 2008, a bottle of beer would have cost you $100 billion Zimbabwean dollars; an hour later, the price had gone up to $150 billion ZWD.

According to Central Statistical Office statistics, annual inflation rate rose to 231 million percent in July 2008 – actually, 231,150,888.87 per cent.

In January, 2009, Zimbabwe introduced the $50,000,000,000 note.

Zimbabwe's currency was suspended on April 12, 2009, worthless due to hyperinflation. (In March, 2007, inflation was running at 1,730 per cent.)

Look on my works, ye Mighty, and despair

I'm starting off my blog with a poem, which is always a bad sign - but don't fear, it’s probably the finest poem in the English langauge. Ozymandias, by Percy Bysshe Shelley, was published in 1818, and hasn’t been beaten yet.

Strictly speaking, it’s about Ramesses the Great, but so skilled is the writer that. . . well, he could be describing us. All empires, at the time, are too big to fall.

Ozymandias

I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown
And wrinkled lip, and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away