Why
‘Peak Oil’ May Soon
Pique Your Interest
By David R. Francis
16 August, 2007
The
Christian Science Monitor
Do a Google search of the Web
on “global warming” and it calls up more than 80 million
references. Search for “peak oil” and the number exceeds
10 million.
In two years or so, world
concern over crude oils supplies should be so great that a Google search
on that subject probably will top that of global warming, predicts Matthew
Simmons, chairman of Houston-based Simmons & Company International,
an investment banking firm for the energy industry.
Peak oil refers to the time
when production of crude oil in the world (or in a country or in an
oil field) reaches its peak and starts to slide. It doesn’t mean
the world has run out of oil - only that the supply of oil isn’t
rising to meet growing demand. That change could be reflected in even
higher prices, if the demand for oil doesn’t stall or fall.
Last Tuesday, the price of
oil futures on the New York Mercantile Exchange set a record, rising
as high as $78.40. That exceeded the previous high of $77.03 set in
July 2006 at the onset of Israel’s war in Lebanon.
The world output of oil actually
already peaked in May 2005 at 74.2 million barrels a day, says Mr. Simmons.
Since then, production has fallen about 1 million barrels a day (MB/D).
If that trend continues, the results for the world economy will be “so
real, so devastating” that peak oil concerns will overwhelm slower-moving
global warming in grabbing world attention.
That’s because today’s
civilization hangs heavily on an adequate supply of oil. It, for instance,
fuels most vehicles, heats many homes and businesses, and is used in
many chemicals and plastics. Oil and natural gas now meets some 60 percent
of the world’s primary energy needs.
Oil shortages, warns Simmons,
could lead to war.
Dr. Fadhil Chalabi, executive
director of the Centre for Global Energy Studies in London, isn’t
so pessimistic. He notes that with higher prices, the demand for oil
has started to fall, at least in the 30 industrial nations belonging
to the Paris-based Organization for Economic Cooperation and Development.
Since 2006, their demand has dropped by about 400,000 barrels a day.
And the demand for crude in bustling and populous China and India rose
only 0.7 percent last year.
His research institute forecasts
world demand will rise “not more than 1 percent a year.”
Other researchers predict 1.4 to 1.5 percent a year, a significant difference.
Mr. Chalabi says forecasts
for the world oil industry cannot be relied on, having proved wrong
in the past. Today’s forecasts do not fully take into account
the impact higher prices have in reducing demand and encouraging alternative
energy sources, he adds.
However, concern over the
world’s oil supply is mounting. Last month, the International
Energy Agency (IEA) issued a report warning that world oil demand will
rise faster than previously expected. The result could be a supply crunch
- “extremely tight,” one IEA economist told the BBC. The
report sees world oil demand soaring 2.2 percent a year to 95.8 MB/D
by 2012. That’s up from the 2 percent annual growth rate it forecast
in February.
The Paris-based IEA advises
26 industrial nations, and, in Simmons’s view, it now has a more
realistic chief economist, Dr. Fatih Birol. So the agency, Simmons says,
is no longer “a cheerleader for cheap oil,” always saying
crude oil supplies are so large that oil prices will surely fall.
In July, the National Petroleum
Council, a federal advisory group representing the oil industry, published
a 476-page study titled “Facing the Hard Truths About Energy.”
Simmons, one of 350 participants who prepared the study, holds that
its wording is not stern enough considering the statistics on the oil
demand/supply situation it includes. The study states, “The world
is not running out of energy resources, but there are accumulating risks
to continuing expansion of oil and natural gas production from the conventional
sources relied upon historically.”
Simmons uses such terms as
“hogwash” and “junk report” in describing the
study.
For years, many in the oil
industry viewed the peak oil forecasts by Simmons as odd. Now his position
has a lot of company. Several websites publish sophisticated material
on the issue. There’s the Oil Drum (www.theoildrum.com), featuring
“Prof. Goose” and “Gail the Actuary.” Those
pseudonyms hide a full professor at Colorado State University and an
actuary in an Atlanta suburb. There’s also the Energy Bulletin
(www.energybulletin.net). The site’s coeditor, Bart Anderson,
say it receives 11,000 visits a day. Peak oil enthusiasts, he says,
have now divided into a majority seeing life after an oil crunch and
those he calls “doomers.”
In Britain, Douglas Low,
director of the Oil Depletion Analysis Centre (www.odac-info.org), foresees
a “crisis coming up” with a real shortage of oil. In June,
he notes, the world used 1.5 MB/D more crude than it produced. He expects
much higher oil prices in the future.
“It’s not a very
happy message,” he says. “A lot of people want to slip it
under the carpet.”
© 2007 The Christian
Science Monitor
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