Friday, August 15, 2008

The Importance of the Timing of Peak Oil

On 6 August 2008, the United States Energy Information Administration (EIA) released its latest International Petroleum Monthly report, which tallies world oil production for a given month. The latest EIA production figures shown in any given report are usually for a monthly period ending two months before the release date of the report, so this latest issue contains data for May 2008. According to this latest report, world petroleum supply averaged 86.05 million barrels per day in May of this year, which is a new record according to the EIA. World crude plus condensate production during May averaged 74.48 million barrels per day according to the same report, which is again a new record, passing the May 2005 record of 74.266 million barrels per day. In addition, this week OPEC issued its Monthly Oil Market Report, which estimated that world oil supply in July 2008 averaged 87.37 million barrels per day – again, a sign of growing petroleum supply. The release of these figures may be a contributing factor in the continuing slide in the price of oil and petroleum products.

However, some analysts have taken exception to these numbers, asserting that they may be overly optimistic. Gail Tverberg, a member of the Oil Drum staff recently wrote an article which questioned the reliability of initial EIA estimates of world production (“May 2008 EIA Oil Production Record. Will It Too Be Revised Downward?”, She pointed out that these initial estimates are usually revised downward by the EIA as time passes, and noted discrepancies between EIA production figures for various countries versus what those countries stated as their actual production. She also pointed out the potential political motivations for the EIA to be less than accurate in telling what is actually going on with oil production. Others have analyzed the discrepancies between the EIA and OPEC numbers for specific countries and have noticed a rather fishy smell (see comments on today's “Drumbeat” section of the Oil Drum website). There is also at least one bit of anecdotal news that indicates that an oil exporting country is shorting its own citizens so that it can send more oil to the US.

I want to suggest (and I am not the only one suggesting this) that the present oil supply and oil market situation is being “gamed” by several powerful key players in order to give the false impression that there is no longer an oil supply “crisis.” This campaign of dishonesty is being aimed chiefly at the West, and specifically at the United States. Why the US? Because the US is still the most powerful nation on earth militarily, and because it is also still the world's most significant economic agent. That supremacy is increasingly resting on a foundation of deception, smoke and mirrors, but while it lasts, the US is a force to be reckoned with.

And this is a Presidential election year. The corporatist powers who actually control the governments of this country know how key a player an American president is in their plans, and will do all they can to install a president who is friendly to their interests. If the American people were to wake up to the actual precariousness of this nation and the magnitude of the mess our leaders have made for us, they might begin to demand the sort of radical changes that would threaten the corporatists.

To a lesser extent, the governments of some of the oil-producing countries are also interested in gaming the system, in order to prevent a large portion of Americans from having to suffer actual petroleum shortages, thus preventing the rise of an American neocon initiative to take over foreign oilfields the way Iraqi fields were seized.

All this means that it is more important than ever to search out the truth about present world oil production, so that we may know what to expect and be prepared to deal with it. I acknowledge a debt of gratitude to Jeffrey J. Brown, a registered Professional Geoscientist in the State of Texas, and to Dr. Samuel Foucher, a long-time oil production analyst. Because of their work and the efforts of others who posted valuable information on the Internet, I went from near-total ignorance of the true nature of our energy predicament to wide-awake alarm within the space of a few months. My awakening had been preceded by growing unease from 2005 to the beginning of 2007, like the unease of a sleep disturbed by an increasingly upset stomach. But it was in the first few months of 2007 that I truly came face to face with the reality of Peak Oil. That awareness has led me to some rather drastic lifestyle adjustments.

But Mr. Brown recently commented that the timing of the worldwide oil production peak is not as important as other issues which we are facing, such as the ongoing and accelerating decline in net world petroleum exports. Here I must respectfully disagree (and I invite him to correct any deficiency in my knowledge, since he knows much more about this than I do). Knowing the timing of the peak and the actual shape of the world oil production profile is very important, because the major controlling figures who run the global “official economy” are closely watching this very issue. I believe that many of them know that Peak Oil will be a severe threat to their status and the continuation of their economic empires, and that they also know that it's in their best financial interests to keep this knowledge from the masses for as long as possible. Therefore, as petroleum supplies become ever more constrained, they will continue to try to game the system, suppressing naturally-occurring market signals regarding supply and demand for as long as it's in their interests to do so. When they finally pull the wool from our eyes, we will surely be confronted by the sight of an economic system that's broken beyond repair for all but the very rich.

So we will need to devise other means for validating whether the world is in fact at or past peak. One bit of data that's still relatively reliable is the EIA Weekly Inventory Report of US commercial crude oil and petroleum product stocks. The EIA Weekly reports for the last three weeks have shown a steady decrease in finished gasoline stocks. This has been due to rising demand caused by lower prices. US crude oil inventories haven't moved from the 295 million barrel range. This seems to show that oil and gasoline prices have fallen because of a perception of reduced demand, and not because of any new supplies. Those who have skills in building complex mathematical models can come up with other means for determining the true state of world oil supply. And we can always look at obvious signs, such as news stories of refinery shutdowns or shortages around the world. Personally, I think we see the beginning of another price spike within the next month. One can't game the system forever. Keep your eyes open!

* * *

I want to start talking about preparations for a post-Peak world. I've been meaning to get onto this subject for a long time, but I keep getting distracted by juicy news stories from the oil patch. In my discussion, I intend to move from preparing yourself as a person to preparing your community (at least those closest to you). These thoughts are just what has occurred to me; others have thought much harder and more deeply, and for a longer time on this subject. As I find time, I will post links to some of their writings. One thing I will soon discuss is the use of appropriate technologies for a post-Peak life (i.e., should I buy solar panels? Should I buy a spinning wheel? How about a portable generator? and so on).

The first thing that occurs to me regarding a post-Peak life is facing the near-certainty that you will have to live such a life. Our economy and society have been built on certain assumptions – the assumptions of ever-increasing technological advancement, convenience, comfort, and prosperity.

These assumptions are about to be overturned.

But facing this reality is a very difficult thing to do for many people. One Peak Oil writer has compared the process of facing the threats of Peak Oil and climate change to Elizabeth Kubler-Ross's portrayal of the process of facing death, with its five stages: denial, anger, bargaining, depression and acceptance. Most of America seems to be in the denial stage, as seen in the sales of tabloid magazines at supermarkets, the viewers of reality TV series, and the willingness to listen to corporate media slaves repeating their masters' assertions that everything will be all right. Some people are angry – especially those who have a vested financial or political interest in suppressing the truth of our predicament. But there are also bargainers. I am an engineer and I can tell you that engineers are some of the biggest bargainers around. Their bargaining consists of the unshakable faith that technology will somehow save us from having to live on less, from having to live a more difficult life than we have been used to (Read some issues of the IEEE Spectrum to see what I mean). All I can say is, Dream on!

If one is willing to accept the probability that life is going to get much more difficult, then one can begin to take inventory of all the conveniences he or she enjoys right now due to technology and cheap energy. Then one can begin to make plans for living without some of these conveniences. For instance, living in a time of expensive natural gas or fuel oil might mean learning ways of living without either during the wintertime. Living in a world in which many of your needs must suddenly be supplied by the power of your own muscles is easier if you have prepared beforehand by getting in shape. In other words, the first preparation you can make is to bravely face the future, take inventory of all of its implications, and then begin to harden yourself to be able to cope with it.

Some practical steps might include the following:

  1. Learn to commute by bicycle. By commuting I don't mean recreational rides, but rather, going to places you need to visit in order to do necessary weekly activities. Gradually increase the percentage of your commuting per week until it's over 75 percent of your total commuting.

  2. Train your body to be comfortable with the thermostat of your house turned down to 60 degrees F or below.

  3. Work out regularly to build your strength and endurance. Make your workouts something that you can do at home, without having to drive to a gym.

  4. Regularly put yourself into situations in which you must do without your usual comforts. Go camping – in a tent, not in an RV – in all kinds of weather. Learn what works in such situations, and what doesn't. If you feel really adventurous, go bicycle camping, and skip the drive altogether!

  5. Learn to live on half of your present income, in the expectation that you may one day be forced to do so.

See if you can add a few suggestions of your own to this list. And tell yourself that you will learn to succeed in facing this challenge. Difficulty does not have to equal hopelessness.

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