Tuesday, July 01, 2008

London Times Online
June 30, 2008
Former President Bush energy adviser says oil is running out
Robin Pagnamenta, Energy and Environment Editor

Of course, oil isn't "running out." What's "running out" is high grade light sweet crude in easy to get places that is inexpensive to refine. What's left is about half the entire historical supply of oil - but it's the sludgy crud at the bottom half of the oil fields that is difficult to refine and has seeped down into hard-to-reach places. This makes it orders of magnitude more expensive to pump out and process than the stuff we have been using - the nice light stuff at the tops of the oil fields that's high grade. Our infrastructure is set up to refine this good stuff, and not the more cruddy stuff at the bottom. That's why we lack capacity to refine more oil right now even if more was pumped out - the refineries are running at capacity and simply can't do any more than they're doing right now. And no oil company is going to waste money building more refineries - by the time they got finished building them, the oil game will be just about played out. They'd never recoup the investment. Nobody is going to throw away money like that - not willingly. Would you invest umpteen-billions dollars in a business you knew would fail in ten years or less? Of course not.

The era of globalisation is over and rocketing energy prices mean the world is poised for the re-emergence of regional economies based on locally produced goods and services, according to a former energy adviser to President Bush and the pioneer of the “peak oil” theory.

Matt Simmons, chief executive of Simmons & Company, a Houston energy consultancy, said that global oil production had peaked in 2005 and was set for a steep decline from present levels of about 85 million barrels per day. “By 2015, I think we would be lucky to be producing 60 million barrels and we should worry about producing only 40 million,” he told The Times.

FYI, demand right now is actually about 90 million barrels per day, if you include all the countries of the world.

Mr Simmons asserted that this, coupled with soaring global energy demand, meant that world oil prices were likely to continue rising. He said that even at present record highs of more than $140 a barrel, oil remained relatively inexpensive, especially in the US, the world's biggest market. “We are just spoiled rotten in the US,” he said. “It's still cheap.”

Rising prices will force a tectonic shift in the structure of the global economy by destroying the rationale for shipping many goods, such as food, over long distances, he said. “This is already happening. In the US, our local farms, ranches and dairies are booming. They are having a huge comeback.”

And organic and sustainable farming is the fastest growing segment.

Mr Simmons set out a radical vision of the future, envisaging a society in which food and many other essentials are sourced and consumed locally and increasing numbers of people work from home. He claimed that the alternative was increasing political instability and conflict over the planet's diminishing resources. “We are living in an unsustainable society,” he said. “If we don't change we are just going to start fighting one another...So let's just start assuming the worst and plan for it.”

Exactly. We need to position ourselves strategically to be self-sufficient communities as much as possible - to relocalize.

Mr Simmons claimed that many countries had overstated their reserves for political purposes and that so-called flow rates were a better indicator of recoverable volumes. He said that the quality of oil produced by Saudi Arabia and other big exporters was declining.

Not news to anyone who's been paying attention - which apparently doesn't include the vast majority of Americans, who are looking for a scapegoat to blame instead of recognizing that our own greedy, selfish, and unsustainable society has caused this mess. We simply cannot continue to expect to gorge on 40% of the world's oil when we are only about 5% of the world's population. The rest of the world isn't going to stand for it, class. Nor should they.

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