For those of
you who have yet to review any of the growing body of research and writing on
Peak Oil/Hubbert’s Peak, but were afraid to ask, this is a good short version explaining the hype. So far, the Bush-Cheney administration
energy policy has focused on taking the Saudis at their word, while acquiring
squatter’s rights over valuable real estate and making deals with unsavory
neighbors we’d normally shun. KwC
The Vanishing Mirage of Saudi Oil: Dwindling reserves may end the
Petroleum Age.
Commentary by Michael T. Klare, LA Times, June 27, 2005
For those oil enthusiasts who believe that petroleum will remain abundant for
decades to come — among them, the president, vice president and their many
friends in the oil industry — any talk of an imminent "peak" in
global oil production and an ensuing decline can be easily countered with a
simple mantra: "Saudi Arabia, Saudi Arabia, Saudi Arabia."
Not only will the Saudis pump extra oil now to alleviate global shortages, as
is claimed, but they will keep pumping more in the years ahead to quench our
insatiable thirst for energy. And when the kingdom's existing fields run dry,
lo, it will begin pumping from other fields that are just waiting to be
exploited. This is the basis for the administration's contention that we can
continue to increase our yearly consumption of oil, rather than conserve what's
left and begin the transition to a post-petroleum economy.
But that may not be the case. In a newly released book, investment
banker Matthew R. Simmons convincingly demonstrates that, far from being
capable of increasing its output, Saudi Arabia is about to face exhaustion of
its giant fields and will probably experience a sharp decline in output
relatively soon. He also argues that there is little chance that Saudi Arabia
will ever discover new fields that can take up the slack from those now in
decline.
If Simmons is right about Saudi Arabian oil production — and the official dogma
is wrong — we can kiss the era of abundant petroleum goodbye forever. This is
so for a simple reason: Saudi Arabia is the world's leading oil producer, and
there is no other major supplier (or combination of suppliers) capable of
making up for the loss in Saudi production if its output falters.
According to the U.S. Department of Energy, Saudi Arabia possesses about
one-fourth of the world's proven oil reserves, an estimated 264 billion
barrels. Also, the Saudis are believed to harbor additional reserves containing
another few hundred-billion barrels. On this basis, the department asserts that
"Saudi Arabia is likely to remain the world's largest oil producer for the
foreseeable future."
Consider the DOE's projections. Because of the rapidly growing international
thirst for petroleum — much of it coming from the United States and Europe, but
an increasing share from China, India and other developing nations — the
world's expected requirement for petroleum is projected to jump from 77 million
barrels per day in 2001 to 121 million barrels by 2025. Fortunately, says the
DOE, global oil output will also rise by this amount in the years ahead. But
over one-fourth of this additional oil — about 12.3 million barrels per day —
will have to come from Saudi Arabia.
The problem is, if you take away Saudi Arabia's 12.3 million barrels, there is
no possibility of satisfying anticipated world demand in 2025.
The Saudis vehemently deny their fields are in decline. The DOE,
with no independent verification, backs them up. In the end, it comes down to
this: America's entire energy strategy, with its commitment to an increased
reliance on petroleum as the major source of our energy, rests on the unproven
claims of Saudi oil producers that they can continuously increase Saudi output
in accordance with the DOE predictions.
And this is where Simmons enters the picture, with his meticulously documented
book, "Twilight in the Desert."
Simmons is not a militant environmentalist or anti-oil partisan; he
is chairman and CEO of one of the nation's leading oil-industry investment
banks, Simmons & Co. International. For decades, he has been
financing the exploration and development of new oil reservoirs. In the
process, he has become a friend and associate of many of the top figures in the
oil industry, including George W. Bush and Dick Cheney.
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Essentially, Simmons' argument boils down to four major points:
(1) Most of Saudi Arabia's oil output is generated by a
few giant fields, of which Ghawar — the world's largest — is the most
prolific.
(2) These giant fields were first developed 40 to 50 years ago, and have
since given up much of their easily extracted petroleum.
(3) To maintain high levels of production in these major fields, the Saudis
have come to rely increasingly on the use of water injection and other
secondary recovery methods to compensate for the drop in natural field
pressure.
(4) As time passes, the ratio of water to oil in these underground fields
rises to the point where further oil extraction becomes difficult, if not
impossible. To top it all off, there is very little reason to assume that
future Saudi exploration will result in the discovery of new fields to
replace those now in decline.
This being the case, Simmons concludes, it would be the height of folly to
assume that the Saudis are capable of doubling their petroleum output in the
years ahead, as projected by the DOE.
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The moment that Saudi production goes
into permanent decline in the not-too-distant future, the Petroleum Age as we
know it will draw to a close. Oil will still be available on international
markets, but not in the abundance to which we have become accustomed and not at
a price that many of us will be able to afford. Transportation,
and everything it affects — virtually the entire world economy — will be much
more costly. The cost of food will also rise, as modern agriculture relies to
an extraordinary extent on petroleum products for tilling, harvesting,
protecting, processing and delivery. Many other products made with petroleum —
paints, plastics, lubricants, pharmaceuticals, cosmetics and so forth — will
also prove far more costly. Under these circumstances, a global economic
contraction appears nearly inevitable.
Only if we act now to limit our consumption of oil and develop non-petroleum
energy alternatives, can we face the "twilight" of the Petroleum Age
with some degree of hope; if we fail to do so, we are in for a very grim time.
Given the high stakes involved, there is no doubt that intense efforts will be
made to refute Simmons' findings. With his book, however, it will no longer be
possible for oil aficionados simply to chant "Saudi Arabia, Saudi Arabia,
Saudi Arabia" and convince us that everything is all right in the oil
world.
Michael T. Klare, a professor at Hampshire
College, is the author of "Blood and Oil: The Dangers and Consequences of
America's Growing Petroleum Dependency" (Metropolitan Books, 2004). A
longer version of this article appears at www.Tomdispatch.com.
http://www.latimes.com/news/opinion/commentary/la-oe-klare27jun27,0,4666067.story?coll=la-news-comment-opinions
Also See
Hamish McRae Oil at $100 a
barrel will do more to save the planet than all the wind farms in the world. “producers did their bit - and have gone
on doing so this year too. But still the oil price rises. Short of some
catastrophic collapse in the economies of China and the US - the world's two
largest oil users - demand seems set to climb inexorably, while supply ...
well, what about supply?
Production was
indeed at record levels last year, but that was thanks to OPEC and to Russia.
Two producers cut production sharply. They were, yes, the UK and the US. We are
not cutting North Sea production because we want to; we are cutting it because
we cannot produce any more. The same goes for the US.
This leads to the
debate about the world's total oil supplies. The conventional view, that of the
major oil companies, is that while production will eventually peak, there is
plenty of oil still to be found, and that production can rise at least for some
years to come. The radical view, articulated by the Association for the Study
of Peak Oil, is that global production is already close to its peak and may
start to decline after 2006.
What seems to be
happening is that globalisation - competition from low-cost producers,
especially in China and India - is holding down world prices. So low interest
rates do not lead to current inflation. Any excess money goes into asset
prices, especially property and fixed-interest securities, but also to some
extent shares. That is dangerous in the long run because asset price bubbles
burst. Will the central banks get the balance right? No one can know. But it is
certain that the peak of the current interest cycle will be the lowest since
the 1950s
http://news.independent.co.uk/business/comment/story.jsp?story=649614
Oil Climbs Above $60 a Barrel. With $60 no longer a threshold _ and with
continued concerns about refining capacities _ prices appeared set to go even
higher, analysts said…Bentz said there is also a speculative component to the
surge in oil prices, though he also believes that the world's limited excess
production and refining capacity have played important roles in keeping traders
on edge about potential supply disruptions. http://www.washingtonpost.com/wp-dyn/content/article/2005/06/27/AR2005062700166.html
