Is
The World's Oil Running Out Fast?
By Adam Porter
at the Peak
Oil conference in Berlin
10 June, 2004
BBC News
How
will you pay to run your car? How will you get the children to school?
How will you heat your house? How much will transported food go up in
price?
How will we pay
for plastics, metals, rubber, cheap flights, Simpson's DVDs, 3G phones
and everlasting economic growth?
The basic answer
is, we won't.
This is the message
from the Association for the Study of Peak Oil (ASPO).
The group of oil
executives, geologists, investment bankers, academics and others has
been warning the world of high oil prices, and the ensuing fallout,
for some years now.
The end of cheap
oil
It includes a diverse
range of oil industry insiders.
People like Ali
Bakhtiari, head of strategic planning at Iran's National Oil Company
(NOIC), Dr Colin Campbell, a former executive vice president of Total-Fina,
and Matthew Simmons, an energy investment banker and adviser to the
controversial Bush-Cheney energy plan.
They are united
by one idea, that global oil production is about to peak, which in turn
will signal the permanent end of cheap oil.
And they warn that
this is the foundation of the current rise in oil prices.
Who hurts when prices
explode?
"Oil is far
too cheap at the moment," says Mr Simmons.
"The figure
I'd use is around $182 a barrel. We need to price oil realistically
to control its demand. That is because global production is peaking."
"If we price
oil correctly," Mr Simmons says, "it could give us time to
find bridge fuels, fuels to fill the gap between an oil economy and
a renewable economy. But I don't see that happening."
The adherents of
the peak oil theory warn the decline of world oil output will force
oil prices higher for good, and that the knock on effects could be catastrophic.
"In my opinion,
unfortunately, there will be no linear change," says Iran's Ali
Bakhtiari. "There will only be sudden explosive change."
"The people
who will be least affected will be the super poor, who already have
no access to energy, and the super rich who do not care if oil is $100
a barrel."
"It is everyone
who is in the middle who will be hurt the most," says Mr Bakhtiari.
"When the crisis comes there will be enormous changes."
Oil rationing?
Much of ASPO's
predictions stem from the calculations of Dr Campbell.
His work on oil
reserves has long suggested that many official oil data are either flawed
estimates or at worst downright lies.
Scandals like the
23% of 'lost' reserves at Royal Dutch Shell have helped to boost interest
in his work.
False reserves threaten
the security of energy supply, just as do bombs under pipelines.
Dr Campbell's conclusion:
oil production and consumption should be regulated by governments.
"Many reserve
figures are highly questionable," says Dr Campbell.
"Many great
oil fields are increasingly old and inefficient. But I don't think oil
is easy to produce with a sniper behind every palm tree."
"The way to
increase energy security is to reduce demand," he says.
'Difficult times'
At ASPO's recent
conference in Berlin, companies such as BP and Exxon and men such as
Fatih Birol, chief economist of the International Energy Agency, began
to talk to the proponents of the peak oil theory.
Whilst they may
not agree with Dr Campbell's theories, their attendance highlighted
ASPO's emerging importance in the oil debate.
In public, Mr Birol
denied that supply would not be able to meet rising demand, especially
from the buoyant economies in the USA, China and India.
But after his speech
he seemed to change his tune.
"For the time
being there is no spare capacity. But we expect demand to increase by
the fourth quarter (of the year) by three million barrels a day."
He pinned his hopes
for an increase in production squarely on troubled Saudi Arabia.
"If Saudi does
not increase supply by 3 million barrels a day by the end of the year
we will face, how can I say this, it will be very difficult. We will
have difficult times. They must invest."
Can Saudi deliver?
But even Mr Birol
admitted that Saudi production was "about flat".
Three million extra
barrels a day would mean a huge 30% leap in output in just a few months.
When BBC News Online
followed up by asking if this giant increase in production was actually
possible rather than simply a desire he refused to answer. "You
are from the press? This is not for you. This is not for the press."
Asking other delegates
- admittedly supporters of the peak oil theory - whether such a steep
increase was feasible, the answers were unambiguous: "absolutely
out of the question," "completely impossible," and "3
million barrels - never, not even 300,000."
One delegate laughed
so hard he had to support himself on a table.
Some recent figures
tend to back up ASPO's outlook.
North Sea production
is declining at an increasing rate, having peaked in 1999.
Not at the predicted
flat rate of decline of 7%, but gradually accelerating from 7% to 8.5%
to 11%.
And the number of
major new oil fields discovered around the world fell to zero for the
first time in 2003, despite an obvious increase in technological expertise.
"We need transparency
with the figures," says Dr Campbell.
"This avoids
profiteering from shortages, the collapse of poor countries and it will
stimulate alternatives."
"Consumer countries
need to be able to audit fields, but at the same time 'flat earth' economists
who believe in endless growth need to change their ideas."
And Dr Campbell
has a dire warning: "If the real figures were to come out there
would be panic on the stock markets, in the end that would suit no one."