“Output from the world's oilfields is declining faster than
previously thought, the Financial Times reported on Wednesday, quoting
from a draft International Energy Agency report it had obtained.
“The newspaper said the watchdog's annual World Energy Outlook
report, which studied the biggest fields, showed that without extra
investment to raise production, the natural annual rate of output decline
was 9.1 percent.”
—
“The IEA forecast China, India and other developing countries'
demand would require investments of $360 billion each year until 2030,
said the newspaper. "The future rate of decline in output from
producing oilfields as they mature is the single most important determinant
of the amount of new capacity that will need to be built globally to
meet demand," the IEA was quoted as saying.”
The IEA have tried to damp down this report.
“There isn’t any shortage of oil, but there is a real shortage
of the cheap oil that for too long we have taken for granted. During
the 20th century, cheap oil - $20 - 30/barrel in today’s terms
- allowed the internal combustion engine to replace the steam engine
and sparked a transport revolution that fostered and fed the innate
human desire to travel. We loved it.
“By the middle of the century warning bells began to ring and
some such as King Hubbert began to point out that world oil was a finiteresource
and furthermore that it was possible to estimate how much remained.
At the time Hubbert was regarded by many as a crank and the industry
line was that new discoveries would continue to replace what had been
used. We now know differently.
“A great deal more oil has been discovered since Hubbert’s
day but his basic thesis still holds. The difference is that today,
with more exploration and more sophisticated exploration tools, we know
the Earth much better and it is pretty clear that there is not much
chance of finding any significant quantity of new cheap oil. Any new
or unconventional oil is going to be expensive.
“A more immediate concern is that today the world supply of oil
is only just meeting demand and this is keeping the price very high.
Earlier this year the price nearly hit $150/per barrel and even with
the subsequent fall back below $100, the forward price is high. These
prices partly reflect short term market jitters about political instabilities
and vulnerability of supplies to natural or man-made disasters, but
more fundamentally there is a concern that even though supplies may
increase they may not increase as rapidly as the demand from large developing
countries. It is this looming prospect of an early overhang of unsatisfied
demand that is keeping forward prices high. All that could change this
view of the future is a major world economic recession, and even the
effects of that on demand have to be put in the context of a rapidly
rising global population.
“There is also another change from the past. Today around 80%
of the world’s oil and gas reserves are controlled by governments
through national oil companies. This is in marked contrast to a couple
of decades ago when international oil companies had the major influence.
Disregarding the potential use of fuel supplies as political levers,
it is entirely reasonable that national governments should have legitimate
policies different from those of oil majors when it comes to exploiting
the natural resources of their countries. They are starting to regard
their shrinking oil and gas resources as something to be husbanded.
King Abdullah of Saudi Arabia recently described his response to new
finds: "No, leave it in the ground - our children need it."
In other words, even those who have less expensive oil may wish to exploit
it slowly and get the best possible price for it - a marked contrast
with the past when oil was sold in a highly competitive market for little
more than it cost to get it out of the ground.
“Today’s high prices are sending a message to the world
that words alone have failed to convey, namely that not only are we
leaving the era of cheap energy but that we have to wean ourselves off
fossil fuels. For once what is right is also what is expedient - we
know that we have to stop burning fossil fuels because of the irreversible
environmental damage they cause, and now it may be cheaper to do so
as well! The problem is that in the developed world our power and transport
infrastructure is based almost entirely on fossil fuels. With the best
will and the best technology in the world this will take decades to
change. In the pages that follow you will read the views of some of
those closest to the oil industry. In the past these views might have
been regarded as heretical. But they are not and their warnings are
to be heeded.”
—
“The energy locked into one barrel of oil is equivalent to that
expended by five labourers working 12-hour days non-stop for a year.”
—
“The production figures of all the five major international oil
companies have been falling for five consecutive quarters.”
—
“…The aged and neglected infrastructure combines with the
problem of demand growing at up to 10% per year to suggest, in one estimate
by analysts, that as soon as 2015 Iran will no longer be an exporter.
In June 2007 the Iranian government brought in fuel rationing as a reaction
to shortages caused by long-run domestic under-investment in refining.
Riots resulted, and in a foretaste of what awaits governments who fail
to meet domestic expectations of oil supply, Iranians set fire to petrol
filling stations.* It will be difficult
indeed for a government to export in the face of this kind of pressure
at home, if domestic demand cannot be met.
“In Russia, oil production from February 2006 to February 2007
increased by over 400,000 barrels per day, whereas exports remained
flat. The excess was needed at home, where Russian car production and
sales grew prodigiously in 2006. The Russian use of gas as an instrument
of economic blackmail of its neighbours since 2006 shows clearly the
kind of treatment states dependent on its fossil fuel exports can expect
from the Kremlin, should a global energy crisis materialise. Ominously,
Russian oil production has fallen in recent months after years of steady
increase.
“Meanwhile in the UK, as domestic oil and gas production in the
North Sea falls rapidly, we will be forced to look increasingly to imports.
Britain imports only 5% of its energy now, but this requirement is likely
to rise to something more like 50% in five years, much of it gas. The
government appears sanguine about this, pointing to the growth of domestic
infrastructure for liquefied natural gas (LNG) and pipelines from Norway,
the Netherlands, and Belgium. But in 2007 imports of LNG into the UK
actually fell. As for the pipelines, in May 2008 Thor Otto Lohne, executive
vice-president of the Norwegian pipeline company Gassco, warned an energy
seminar that long-term contracts with continental European companies
meant that: "the UK is a secondary priority. Like it or not, that
is a fact." ”
* Smart move
☺
The mess Brown the Clown has allowed to develop is
unconscionable.
