No Turning Back - Martin Wolf Commentary On Dealing With Expensive Energy Reality - FT

[hatrack]

Oil at $US200 a barrel: that was the warning from Goldman Sachs, published last week. The real price is already at an all-time high. At $US200 it would be twice as high as it was in any previous spike. Even so, it would be a mistake to focus in shock only on the short-term jump in prices. The bigger issues are longer term. Here are three facts about oil: it is a finite resource; it drives the global transport system; and if emerging economies consumed oil as Europeans do, world consumption would jump by 150 per cent. What is happening today is an early warning of this stark reality. It is tempting to blame the prices on speculators and big bad oil companies. The reality is different.

Demand for oil grows steadily, as the vehicle fleets of the world expand. Today, the US has 250 million vehicles and China just 37 million. It takes no imagination to see where the Chinese fleet is headed. Other emerging countries will follow China’s example. Meanwhile, spare capacity in members of the Organisation of the Petroleum Exporting Countries is currently at exceptionally low levels, while non-Opec production has equally consistently disappointed expectations.

It looks increasingly hard to expand supply by the annual amount of about 1.4 million barrels a day needed to meet demand. This means an extra Saudi Arabia every seven years. According to the International Energy Agency, almost two-thirds of additional capacity needed over the next eight years is required to replace declining output from existing fields. This makes the task even harder than it seems. As the latest World Economic Outlook from the International Monetary Fund adds, the fact that peak production is reached sooner, because of today’s efficient technologies, also means that subsequent declines are steeper.

This is not to argue that speculation has played no role in recent rises in prices. But it is hard to believe it has been a really big one. True, the dollar price has risen sharply, but that is partly the result of the decline in the dollar’s relative value. As I have argued before, if speculation were raising prices above the warranted level, one would expect to see inventories piling up rapidly, as supply exceeds the rate at which oil is burned. Yet there is no evidence of such a spike in inventories, as Goldman Sachs and the IMF point out.

EDIT

http://www.businessspectator.com.au/bs.nsf/Article/The-new-cost-of-oil-EM3EQ?OpenDocument

[crimsonblue]

1. too bad there's no evidence that SA is running out of oil..

for that matter, there's no evidence any of the OPEC countries are running out of oil.. In fact, a huge new reserve was found off the coast of Brazil, prompting that country to consider applying to join OPEC. Investment in solar, wind, and emissions-free coal are what we need. Maybe even a little nuclear power thrown in .

[Terry in Austin]

2. Straw man: "running out of oil"

Nobody ever claims that. Certainly not anyone who is serious about Peak Oil.

Just the fact of supply falling short of demand is dire enough. Production has stopped expanding, while demand has not. Most of the major oil fields have peaked and are in decline. Saudi Arabia is playing like it could increase production rates "if it wanted to," but this should soon prove to be a coy pose.

The Carioca field in Brazil could be fairly big, perhaps 5 billion barrels, but it's early to tell. Tupi, also recent, is of comparable size, but both are very hard to get at and will take a long time to develop. Estimates for Tupi put production at about 100,000 barrels per day at first, but it will take until 2020 or so to get up to 1 million bpd.

These figures just barely qualify the fields as "large." Current oil production worldwide is around 86 million bpd. It's been flat for three years, and will not be going up. Decline is inevitable, starting right about now, and these new discoveries will, at best, simply prevent the decline from being quite so steep.

Yes, we need solar and wind. "Clean coal" is an oxymoron right up there with "healthy cigarettes," but we'll probably see a lot more coal anyway. Nuclear? Well, "a little" is definitely the operative term. But we have to keep in mind that none of the alternatives, or any combination of them, will be able to make up for diminishing oil reserves.

[crimsonblue]

3. I didn't say "clean coal"

I said emission free coal. This is feasible, and should be done. Researchers have found a way to utilize the carbon in emissions to create plastics. And we have filtering technology that can make the exhaust almost squeeky clean. The exhaust stacks needn't be the huge vertical structures now. You could route the exhaust through a horizontal structure that scrubs it clean, and then release clean air into the wild. Don't go attacking me, I wasn't attacking you. I meant to say in my previous reply, but forgot to, that the oil prices are artificially high. Based on output, they shouldn't be this high..

[NNadir]

4. Researchers have found ways to utilize the carbon in emissions to create plastics?

Do tell...

I guess they don't teach much about the laws of thermodynamics these days, but I already knew that.

From where is the energy for this miraculous transformation supposed to come? Do the words "perpetual motion machine" mean anything?

[crimsonblue]

5. the carbon is the material used... not the energy mechanism....

no laws of thermodynamics need be broken... and don't treat me like I'm a fucking retard, please.

[crimsonblue]

6. here's a link for ya...

I guess they don't teach much about researching before you go spouting off on irrelevant laws of science these days...

http://dsc.discovery.com/news/2008/04/10/carbon-dioxide-plastic.html

[NNadir]

8. Um...um...um...um...

I guess they don't teach much about the study of the primary scientific literature these days.

I think I can make an argument that I really don't need a google link to claim that I've given considerable thought to the question of carbon capture, chemistry and thermodynamics:

http://www.dailykos.com/story/2007/6/17/19109/0486

The real problem with our culture is that glib handwaving without much thought at all - with no thought whatsoever in fact - is so popular.

A simple entropy argument can be made about this case, but the number of dumb glib reporters who have contemplated simple arguments about entropy is zero.

The number of plastics plants that derive their raw materials from the smoke stacks of coal fired power plants is zero, although the potential to hydrogenate carbon dioxide has been known for more than 7 decades.

[NNadir]

7. Little?

Nuclear power is "little?"

That should come as a surprise to France, the sixth largest economy in the world, where the fourth largest export is um, well, electricity, almost all of it produced from nuclear energy.

Thirty exajoules of primary energy is not "little." It is the equivalent of about 30 gallons of gasoline for every man, woman and child on the planet. I note that there are many people on this planet who could not even dream of having 30 gallons of gasoline.

Nuclear is, in fact, by far, the world's largest source of climate change gas free energy. The problem with oil and coal and gas is not supply. The problem is waste. There is no practical way to dispose of dangerous fossil fuel waste. No permanent repositories for dangerous fossil fuel waste are planned and the reason is simple. Permanent dangerous fossil fuel waste repositories are impossible to build.

In any case, nobody is going to be pumping billion barrel quantities of oil if the atmosphere collapses.

In about 5 years or less, nuclear power plants will be being built on a panic basis. They will probably not be able to build enough of them to reach 500 exajoules in the lifetime of any living adult, but they are not just the best shot we have, they are the only shot we have. No other form of energy that is an alternative to dangerous fossil fuels is remotely as near as successful as nuclear power.

[tanstaafl]

9. If 5 billion barrels is correct ...

Then it is only about 56 days of worldwide oil supply at current consumption rates of approx 89 MBD