Energy Security

[slapout9]

An opposite view about Peak Oil.....there is no such thing Stuff didn't come from dead Dinosaurs at all. Link to article by F. William Engdahl
http://www.globalresearch.ca/index.p...xt=va&aid=6880

[Dayuhan]

Engdahl's theory looks to me to be as full of holes as a Dick Cheney hunting buddy (ok, a low blow, but hard to resist), but I haven't time to point them out...

Life's catching up, but to abbreviate an extensive argument:

As suggested above, I suspect that the peak we've reached over the last 5 years is less driven by absolute scarcity than by the limits of a production infrastructure constrained by two decades of underexploration and underinvestment.

Quite a few "analysts" point out that the price increases after 2004-2005 were not paralleled by production increases. The reason is simply that existing infrastructure had reached maximum output, and the time lag between the decision to invest and actual production is too extensive to allow higher prices to call up more oil overnight.

The GCC currently has about $300 billion worth of oil projects underway, aimed at raising production capacity by approximately 5mbpd. The Saudis have discussed adding another 2.5 above that, eventually raising their total capacity to 15mbpd. Some of these projects dropped to the questionable level as prices plunged, but with the fast recovery to today's levels I expect most of them to go ahead.

Note that this added capacity may not be used at any given time. The GCC has no incentive to produce more than demand requires, but they do see a real advantage in holding the bulk of the world's surplus capacity, and having the ability to use that capacity as they see fit.

Other areas are also raising capacity. Projects currently underway are expected to add 1.1mbpd in Angola. Caspian production could increase by up to 2mbpd if transport hurdles can be overcome. Libya plans to add 1.5mbpd.

Obviously none of this is guaranteed, but we are speaking here of up to 10mbpd potentially coming on line in the next decade. This is primarily a response to the recent price spike and the expectation of continued high prices, a response delayed by the reality that bringing new production onstream takes time.

There are other areas that have seen production declines, stagnant production, increases below capacity or underproduction due to political and security conditions: Venezuela, Nigeria, Russia, Sudan, Iraq, Iran, Equatorial Guinea. Some of these may stagnate or deteriorate further, but it is also possible that some will see significant production increases.

Of course there are areas where production is constrained by absolute depletion, particularly in the US, the North Sea, and Mexico (though Mexico could probably do more with additional investment and a lot less politics, and the US has sources it is not exploiting for environmental and political reasons).

The pattern of extended glut followed by abrupt shortage has ramifications on the demand side as well. One of the most striking comparisons of energy use in the developed west vs the emerging economies is in energy consumption per unit of gdp. Compare the US to China in this category, and the Chinese energy inefficiency is staggering. This is partly a function of early stage industrialization, but it's also because the physical and planning infrastructure underlying the Chinese boom was put in place during the oil glut, and built on the premise of cheap oil. The Chinese have seen exactly how vulnerable they are to price spikes, and I expect a very real effort to diversify and to improve efficiency. Demand will increase, but the pace of increase will slow.

In short: yes, there is a plateau, and yes, there are serious risks of shortage. Both plateau and risks, though, are primarily driven by political, security, and investment concerns, not by impending scarcity or the arrival of an abstract peak.

I shall return, like MacArthur... hopefully sooner, and with less company.

[Rick M]

Hi, Dayuhan
You have obviously thought a great deal about these issues and your observations are excellent.

Your choice of the Oil Drum entries by Sam Foucher is a good one to illustrate your point.
I must admit that I have difficulty understanding some aspects of both his graphs and his text.
In any case his focus seems to be on projections… anticipating the future, and I have little interest in the specifics of predictions.
His projections may be correct, in which case peaking is imminent.
His projections may turn out to be overly pessimistic, in which case the impacts may fall more on our children and grandchildren.
Personally, I am even more concerned that the burden may fall on them, so the timing of peak seems minor to me (apart from the fact that a later date affords us some valuable time to mitigate, though I doubt that North Americans would cooperate enough to make effective use of the extra time).

I agree with most of your points but the issue of oil-field depletion needs to be weighed against the potential increased production which you (correctly) listed.
I don’t think that I agree with your conclusion that our recent difficulties (possible plateau and attendant risks) are unrelated to arrival of peak. I think we are closer to peak than most mainstream analysts concede, and that the increased price volatility is a reflection of that.
I do agree that there was no impending scarcity when prices & demand peaked last summer.
I would like to consider your arguments a bit further before responding to them in detail.

Meanwhile, I should mention that my own thinking on energy security has shifted considerably over the years.
The larger Peak Oil issue was the initial focus… I wanted to learn whether it was BS or a legitimate concern. I am now convinced that it is the latter.
But both common sense and the work of Robert Hirsch, Jeff Brown, (Canada’s) Jeff Rubin and Chatham House (UK think-tank) all point toward export decline as a second and more imminent concern.
Third, both concerns then led to the issue of emergency planning (by government, not the personal/survivalist kind).

The last of these has been my primary focus for the past two years, but I would prefer to leave that aspect for now and return to the first two (PO and export decline).

Both topics are covered quite effectively in a UCSB lecture (undated) by a French analyst and by Jeff Brown, who was one of the first to raise the export decline issue.
This YouTube link takes a full minute to download and get rolling, but I believe it is worth examining:
http://www.youtube.com/watch?v=O7h4V...layer_embedded

The first presentation, “A Peak Oil Primer” is by Catherine Gauthier (4:30- 23:30).
She examines demand growth, URR, timing of peak (at 12 min), its consequences, etc.

The feature presentation is by Jeffrey Brown (25:00 –59:00) whose analysis is in three parts:
1. Peak Oil (27:00 –39:00). Please note his point at 29:00 about the minimal difference to the timing of peak which results from having additional reserves. Also, at 37:00 he points out that in post-peak Texas, a surge in drilling did nothing to stem the decline in production. He asks a very good question at 39:00.

2. Export Decline (39:00- 57:00) Brown’s central point is that global oil exports could effectively be finished around 2030 (ie. a very serious problem). Meanwhile, most of the optimists are telling us that peak production is unlikely to occur prior to 2030 (ie. no need to worry for a few decades). Yet the difference between the two scenarios is radically different: a world which has just hit maximum production versus a world with no remaining export capacity. (The next 20 years should be very interesting, especially on the energy front, and there are many reasons for Defense analysts to get involved proactively.)

3. Electric Transportation: (57:00 - 58:45)

If people don’t have an hour to spend on this (which I can fully understand), I would encourage them to at least examine Brown’s 18 minute analysis of export decline (39:00 - 57:00).
If anyone spots something which they do not feel is credible, please speak up.

Thanks again for your interest, everyone.

[Dayuhan]

Hi Rick,

More comments (there is always something...)

Your choice of the Oil Drum entries by Sam Foucher is a good one to illustrate your point. I must admit that I have difficulty understanding some aspects of both his graphs and his text. In any case his focus seems to be on projections… anticipating the future, and I have little interest in the specifics of predictions.

I don't fully understand how the Oil Drum site works... there seems to be content from a lot of different people, and I'm not sure what sort of vetting or editorial control goes on. I admit that I haven't looked all that closely: there are a lot of barrels on the Internet, and when I find a couple of rotten apples on top of one I tend to move on and look for another.

Predicting the future is an intrinsic part of the peak oil discussion: you can't talk about a peak without postulating a subsequent decline. One of the problems that I have with the projections on sites like Oil Drum is the radical divergence between the projections they cite and those that come from the big three of mainstream energy analysis: EIA, IEA, and OPEC. These institutions have access to all available data on production and depletion, and they have an abundance of analytical resources at their disposal. So why are their projections so different from those we see so often from the "peak oil" discussion? You almost have to postulate that the mainstream analysts are either completely incompetent or conspiring to collectively present baseless projections, and neither hypothesis sounds terribly credible to me.

Many years of working in the muddy ground between financial and political analysis has left me suspicious of sophisticated modeling processes, especially when they kick out results that seem questionable to me. I've seen too many people (especially in the financial world) use the sophistication of their models to validate their conclusions, conveniently failing to mention that cherrypicking the data you feed into the model will provide whatever result you want to produce. Torture the data enough and they will tell you whatever you want to hear.

I'm suspicious of the discourse claiming that the 2005-2008 plateau was "the peak" because too many alternative explanations for the observed phenomena are not considered. It has become almost a mantra in the "imminent peak" circle that from 2005 onward rising prices could no longer call up more production. The possibility that installed capacity had peaked and that high prices can call up production with a substantial time lag between investment and results, while obvious, is not discussed. Similarly, the downward production curve in mid 2008 looks terribly ominous until you put it up against a price chart, at which point the relationship becomes too obvious to ignore. All too often it is simply stated that mid 2008 marked the beginning of "the decline" in production, without discussion of the obvious connection between plummeting prices and production cutbacks.

Personally, I am even more concerned that the burden may fall on them, so the timing of peak seems minor to me (apart from the fact that a later date affords us some valuable time to mitigate, though I doubt that North Americans would cooperate enough to make effective use of the extra time).

I share this concern, which is one reason I feel that crying wolf over hypothetical peaks is a bad idea. If we announce a production peak and there isn't one, the public gets the impression that it's all hype and not an issue. The resource is finite and there will eventually be a peak. The only way I can see to maintain an impetus toward conservation and diversification is to keep prices high. The worst thing that could happen at this stage is another glut.

I don’t think that I agree with your conclusion that our recent difficulties (possible plateau and attendant risks) are unrelated to arrival of peak. I think we are closer to peak than most mainstream analysts concede, and that the increased price volatility is a reflection of that.

There may be a bit of circular logic here: we speculate that price volatility will accompany a peak, then cite price volatility as evidence of a peak. Of course a peak in production while demand is rising will create a price spike, but why should there be a difference between a situation driven by "a peak" and a situation driven by "the peak"?

We also need to consider that 2005-2008 saw intense price volatility across the commodities spectrum, not just in oil. Some of this was related to oil: higher energy costs drive production and transport costs up, and diversion of agricultural land to biofuel production did help to drive grain and meat prices up, but that's not a full explanation.

When I look at that period I see:

1. A rapid and generally unpredicted increase in demand across the commodities spectrum, primarily from East Asia, but this was a period of economic growth and demand growth around the world.

2. A substantial and rapid depreciation of the currency in which most commodity trades are denominated, supporting faster increases and creating an incentive to hedge the dollar with commodity trades.

3. The combination of inflated asset values and overextended leverage ratios created a vast pool of capital for speculation in commodities, and the rapid increase in commodity prices made such speculation attractive.

The extremely rapid spike in commodity prices in early 2008 and the extremely rapid plunge in late 2008 were too aggressive to be explained by supply and demand. The plunge in particular is very consistent with a liquidity crunch sucking speculative capital out of commodities.

I could go on, but suffice to say that there are many explanations for volatility that do not involve an absolute production peak.

I'm not trying to say that the idea of "peak oil" is BS - obviously it can't be. I do feel that the hype around the idea that the peak is imminent or recently past is baseless and may actually detract from rational planning.

Planning for abrupt scarcity is certainly necessary, but I think it's easier to justify that planning on the grounds of security and political risks than on the more nebulous grounds of "peak oil". Whether or not you believe an absolute production peak is near, the vulnerability of major suppliers is clear: I would rather argue that we need an emergency plan to deal with the possibility of a security crisis in the Middle East (Straits of Hormuz closed, instability in Saudi Arabia, nuclear confrontation... take your pick) than claim that we need an emergency plan because a production peak is imminent. It's easier to justify and the need is clearer.

Just thoughts and opinions, as always...

Steve

PS: Couldn't pull down the videos; I live on a mountaintop in the northern Philippines (while working primarily in Dubai - long story) and the connection speed is not up to it. Is there a transcript anywhere? I'd rather read than listen in any case...

[Rick M]

Hi, Steve

Thanks for your latest detailed observations, and I’m sorry that I still have not responded to all of your ideas in your previous posting.
We’ve finally had a break in the rain so I’ve been busy at the hay.

I’ll take your points in order:

1. The Oil Drum
I don’t like their lay-out… vertical with wide sidebars, hard to read because the reader is forever scrolling up & down… hard to work with.
I also don’t like the fake names, but I’ve come to learn that it’s necessary for some of the most knowledgeable contributors to remain anonymous, so that aspect no longer bothers me.
Personally, I prefer Energy Bulletin which prefers sourced info and a standard wide format in terms of presentation.
But TOD has some excellent info from credible analysts: please examine this one on export decline and let me know if there is something you are skeptical of:
http://europe.theoildrum.com/node/4179

I have no answer to the gap between what the mainstream analysts say (the three that you mentioned, plus I would add CERA and some but not all industry officials) and what the PO analysts say.
Personally, I find almost all of the main PO analysts to be credible.
Simmons is an industry insider, has done the annual forecasts for World Oil journal for many years, etc…. it’s hard to imagine that he needs book money, nor how his up-front concerns could possibly help his company win contracts.
I think the guy deserves a medal.

Likewise Bob Hirsch…. it appears that doing the research for the 2005 paper has become a bit of a life-changing wake-up call. He and Bezdek continue to push on this issue.

Meanwhile, both industry spokesmen and senior bureaucrats have many good reasons to express a “no foreseeable problem” message.
The recent WEO was a major step for the IEA but I was stunned to discover four months later that my country’s lead ministry had not shifted its position to reflect the IEA’s sudden worries. The ministry still say that “there are no imminent peak oil challenges” and that “Canada’s oil supply is secure for about 200 years.”

2. peak in 2005-08
I agree with your points, but the PO analysts have always said that we can only know from the rear-view mirror, well after the peak has occurred.
And price volatility may be worse than steady high prices since the dips subvert the efforts to bring along the next-generation liquid fuels, which sustained high prices would foster.

3. Price volatility
You may be reading too much into what I had said.
Like yourself, I am not convinced that we are at peak, though I do think we are so close that it barely worth debating, especially if we examine it from a net-energy perspective.
Is there enough oil in the ground to get over 90 mbpd? Certainly.
Will we ever see the 130 that was talked about only a few years ago? Not even close.
But how much physical energy and how much additional financial investment will it take to get us over 90?
I believe that nearing the apparent peak will cause volatility of both price and supply, but volatility alone is no proof of peaking..

4. the 2008 price spike
I agree with your three points, including the third (speculation).
The recent talk about limiting speculation on oil (same as limits re food-grains) could be helpful in containing the next spike.

5. fuel emergencies
As for your final paragraph, I agree completely, and please remember what I indicated in the previous post… my own thinking has shifted considerably over the years, from
1. becoming aware of PO and viewing it as a legitimate and overlooked concern, to
2. recognizing that pricing and export decline would be more imminent issues, especially for import-dependent regions, to
3. my current focus on government plans for fuel emergencies.
I view the stresses caused by a real (or even an apparent) peak as likely to precipitate an event which then trips a fuel crisis (rather like the shot at Sarajevo in June, 1914 which sparked WWI, meanwhile pressures had been building for years).

Meanwhile, when I began to enquire about fuel emergency plans, it became clear that this is a grossly overlooked area, especially here in North America.
It was then that I contacted the military (in my country and in several other countries), believing that this is a neglected matter of internal national security.
The military/security issues would be external as well, of course, but they have been widely acknowledged & discussed.
It’s the threat to domestic social order that so few are willing to address.

Hence the Energy Security thread on this site and at Armed Forces Journal.
Hence also two postings which I expect will be posted at Energy Bulletin within the week, both of which examine studies by US military analysts.
They will be posted here as well.

6. the export decline video
Sorry, I don’t have a transcript.
But Brown’s theory is illustrated & examined on the Oil Drum link (above).

I greatly appreciate your insights on this vital topic, Steve
--rm

[Dayuhan]

But TOD has some excellent info from credible analysts: please examine this one on export decline and let me know if there is something you are skeptical of:
http://europe.theoildrum.com/node/4179

Right up on top of that link I see a big multicolored chart, and there's plenty there to be skeptical about. The chart holds projections for 18 different exporters. All but one - the former Soviet Union - are forecast to peak in 2006, the year the chart was produced, FSU is forecast to peak in 2010. The forecast declines after 2012 descend at a remarkably - and suspiciously - consistent pace.

What bothers me about this set of projections is the almost identical forecast curves for so many different exporters. In a real-world projection set based on real country-by country-analysis there should be far more variation. Some producers should be able to hold a plateau and reduce the pace of decline by additional investment in production capacity, some should show far steeper declines... but in the real world there will always be variation, that kind of consistency in the export curves of such a diverse group of producers is beyond implausible.

Farther down the page we see the comment that the chart was produced by "a simple accounting exercise, based upon rudimentary forecast tools", which may explain the deficiencies. It looks like they simply imposed the same assumption set on each producer without regard for the variables.

The problem with forecasts beyond the short to early-medium term is that there are too many variables and too many of those variables are non-quantifiable. Of course analysts will insist on producing forecasts, no matter how low the confidence level, but in many cases these forecasts tell us more about the agendas of the analysts than they do about the future of whatever is being analyzed.

Meanwhile, both industry spokesmen and senior bureaucrats have many good reasons to express a “no foreseeable problem” message.

I'm not sure I see those reasons. It seems to me that energy analysts across the board have a very substantial stake in talking up the idea of impending crisis. Squeaky wheels get grease, and those who analyze oil, whether private, government, or multilaterally funded, are going to get more attention and bigger budgets in an atmosphere of imminent crisis. Politicians who see a major problem on the horizon have every incentive to raise the alarm: how else do you build the political will required to drive responsive measures? Oil producers will want to raise the issue as well: fear pushes prices up, and producers want to get as high a price as possible for their reserves, especially if they see those reserves dwindling.

Where's the incentive behind "no foreseeable problem"?

There's a great deal missing from the discussion, it seems to me. Projections have to be based on assumptions, especially about three critical elasticities: price/production, growth/consumption, price/demand. I don't see that discussion happening, or I see it happening in terms that seem driven by a desire to generate a pre-ordained conclusion. I don't see nearly enough discussion of political, security, and investment risks, the constraints they pose on production and exploration, and the possibility of changes in those situations.

When I look at the charts that spring up all over the Oil Drum, for one, I get the feeling that they are designed to generate fear. Look at how all of the projections show a peak followed by an absolute dive... that says "scare chart" to me. I think a fairly extended plateau trailing off to a gradual decline is a lot more likely, with fast declines among some producers offset by transient increases in others, with some producers stepping up in response to improved political or security climates, others running into sharp barriers... in short, complexity. When I see simplicity and consistency I tend to tune it out, because in my experience the real world doesn't work that way - though agendas definitely do.

It also strikes me that when the sky is falling, people who sell sky-props do really well. I don't see any financial disclosure on the Oil Drum, for one. There's a donation button, but who donates? Who pays the bills? What money comes in, and from who? I don't see any meaningful privacy policy either: if you go to sign up (I didn't) they promise that your e-mail address will not be made public, but they don't say anything about selling it. What do you figure that mailing list would be worth to somebody in the business of promoting energy stocks...?

That might be cynicism or paranoia, but when expended effort exceeds visible reward by a large margin, the possibility of invisible reward is always there.

In any event, my own personal tendency is to take what I call the Olympic Diving method of examining projections: toss the low and high scores out from the start. Somewhere between the diving bell-shaped curve and the perpetual rise lies reality, mixed up in a huge bundle of non-quantifiable political and security-related variables. Preparation, flexibility, and above all sustained high oil prices will serve us well... panic will accomplish nothing.

[aangel]

Hi, everyone. I hope I can join the conversation...I'm happy to represent the view that oil has peaked or will peak very soon.

I think it's important to put the near peak models in context. What seems to be happening is that the far peak models are moving closer in time so that we have the following situation:

• (2010-2012) Association for the Study of Peak Oil and Gas — the people raising the alarm
• (2015) Shell Oil ("reach a plateau") — see their website for their latest scenarios "Blueprint" and "Scramble" (http://www.shell.com/scenarios)
• (2020) Neftex/Toyota — this only happens if three conditions are met: Iraq must increase its production to 8mb/d (from its current ~2mb/d), Saudi production must not decline at all and each expensive project that has been fiscally sanctioned must come in on time
• (2020) IEA — for this peak date, the oil industry must put into production the equivalent of four Saudi Arabia's in twenty years to maintain current production, six Saudi Arabias if growth resumes
• (no date) DOE — the Department of Energy does not put out peak oil models, they put out consumption models and assume the oil industry will supply the oil. People then mistake these for supply models and this is the source of untold planning errors by third parties using DOE graphs.

Then there is the CEO of Total Christophe de Margerie who has continually lowered his estimate of peak production so that it is now down to 90mb/d.

Given the above, it seems like a near term peak is almost certain since the assumptions of the other models are unlikely, in my view, to come to pass. For instance, $170B worth of oil projects have been cancelled in the last nine months due to the credit crunch and reduced near-term oil use projections. (See the various megaproject databases for more on that.) That's why the near peakists are asserting that we will never surpass the production of last summer. The projects to do so are no longer on the books and depletion marches on.

There are some outlier models like CERA but they have recently backed away from their view because it was clearly untenable (peak in 2030) and they were increasingly looking "out of touch."

Once one has satisfied oneself that we will have a near peak, then it makes sense to focus on the near peak models as Samual Foucher does on The Oil Drum.

One could quibble over whether the peak is in this decade or it will show up early in the next decade but asserting that it will occur past 2020 requires some awfully optimistic assumptions.

On the matter of costs for the marginal barrel of oil, CERA has put out this graph. While it is a little dated (> one year old) it shows the relative costs well. Prices have come down perhaps 15%-20% since the graph was made.



And of course the net export problem is real and is going to cause what I call "The Great Oil Squeeze" — top line production will decrease while oil-producer consumption will go up increasingly leaving less oil available to the world market. With gasoline at 20 cents (Venezuela) or 90 cents a gallon (Saudi Arabia), there is simply no reason in these producer countries to conserve and their populations continue to rise.

-André

[Dayuhan]

Rick...

Forgot to mention: another thing that bothers me about the data on the Oil Drum link you is that the historical export data for Venezuela is simply wrong. Venezuelan exports peaked in 96, had a sub-peak in 2000, and declined steeply from 2000-2003. The Oil Drum chart shows a sharp rise in Venezuelan exports from 2000-2003. If their "country-by-country analysis" misses out on historical data that is a matter of record... how are we supposed to trust their projections?

Given the above, it seems like a near term peak is almost certain since the assumptions of the other models are unlikely, in my view, to come to pass. For instance, $170B worth of oil projects have been cancelled in the last nine months due to the credit crunch and reduced near-term oil use projections. (See the various megaproject databases for more on that.) That's why the near peakists are asserting that we will never surpass the production of last summer. The projects to do so are no longer on the books and depletion marches on.

Some oil projects were put on hold when prices and demand projections dropped. Liquidity was not an issue: Saudi Arabia, Kuwait, Abu Dhabi etc do not face meaningful liquidity constraints. They are simply limiting new investment to the level they see as necessary. They have no incentive to produce more than the market will consume.

In the medium to long term both production and consumption are responsive to pricing. Growth and energy consumption are not necessarily proportional: look at a chart for OECD economic growth from 2002-2008 and a chart for oil consumption over the same period.

The other big question is a simple one: how much expensive oil is really out there? The only honest answer is that we don't know: for most of the last 30 years there has been little to no incentive to even look for oil in places where production costs would exceed $30-40/barrel, let alone develop these resources. We won't see significant moves in this direction until prices are sustained at a level at or above the $60-70 range. A spike will not inspire the necessary investment, it needs a clear, sustained price plateau.

High prices will flatten demand growth - it may not happen overnight, but it will happen. Look for the Chinese to build a lot of nuclear plants and burn a lot of coal over the next few decades: Greenpeace will be pissed, but the Chinese don't care. NIMBY is not a problem there.

High prices will call up more production. It won't happen overnight, but it will happen. How much more? Again, we don't know.

Political and security developments will have a major impact. 10 years from now Iraq could be producing 6mbpd... or nothing. Similarly variable possibilities exist for many other producers, and are almost impossible to project or quantify.

[Rick M]

Welcome, Andre, and thanks for your list of projections re timing of peak..
The CERA graph is also useful… it highlights the fact that price volatility may be more problematic than sustained high prices, since volatility will routinely undercut the efforts to bring the more expensive (and eventually necessary) oil on-stream.

Steve, once again your observations are detailed and specific.
1. de Sousa’s graph
I am trying to contact Luis de Sousa and will invite him to join this discussion.
I assume that he will be able to defend his projections.

2. Incentives for optimism
I agree with many of your observations.
But there are many reasons for industry to present an optimistic front and these outweigh the benefits of raising the alarm (which you identified).

I am no financial analyst, but surely if potential investors believe that individual oil companies were faced with decreasing access to viable reserves, were burdened with aging infrastructure, were likely to be penalized by some sort of “carbon pricing,” and were facing an significant (perhaps government-supported) shift to alternative sources of energy, this would surely hurt their ability to retain investors, the value of their shares, and their overall financial viability.

Similarly, government bureaucrats surely have a vested interest in assuring the public and the Ministers/Secretaries (to whom they are accountable) that they are doing a wonderful job of anticipating future needs and laying the groundwork for that.
There are many other reasons to maintain the status quo: employment, royalties, safeguarding investment, retaining stock-holders, maintaining existing flow rates, etc.

Politicians are extremely reluctant to sound the alarm on an issue for which they have no credible & palatable solution. When one considers the incomparable net energy which we get from petroleum and the many benefits and comforts which we obtain from it, who on earth is likely to vote for a politician who (as you point out) is describing an unhappy scenario based on a speculative scare chart?
That politician would be characterized as a scare-mongerer, a person who lacks faith in the creative abilities of his nation, is unworthy of a leadership role, etc.
If you take a look at some of the videos of presentations by Rep. Roscoe Bartlett, you will not that he is speaking to a near-empty hall much of the time… no-one is interested.

To his credit, he doggedly perseveres, stressing always the larger points which really matter:
- fossil fuels are finite
- we are using oil at 1000 barrels a second and have become dependent on it for virtually everything
- it’s getting harder and more expensive to obtain
- our oil-related infrastructure commitments (highways, auto sector, heating, agri-food, military, etc) are enormous and will require decades to alter (to what alternative source?)
- carbon emissions are beginning to inflict serious environmental consequences
and so on… you know all of this and I presume that you would not quarrel with any of these larger points.
Roscoe (now 82) keeps on pushing, reminding people how worried he is for his grandkids.
He deserves a medal.

The details over when specific countries peaked in production or in their exports will, in the end, matter little.
I am certainly no fan of Bush, but I do think he was correct in referring to our relationship to oil as an addiction.
Despite all the info on climate change, we regularly see people addling their cars to run the A/C… 200 hp to keep someone cool on a perfectly normal summer’s day.
Most North Americans will resist any attempt to deprive them of these everyday comforts, the political perils.

Sorry for the rant.
We’ll get back to the issue of export decline, but this is enough for one posting.

--Rick

[aangel]

Hi, Steve. There is a lot in your post so I'll just address of few of your points and perhaps Rick will discuss the others.

One thing you mention is that there is little incentive for bureaucrats and industry spokespeople to hide "bad news." I see it completely differently. The incentives to keep smiling and saying there is no problem are many and very, very strong.

For industry, their company share price is directly correlated with the expected future earnings of the company. For an energy company to say that it is having or will have trouble securing future product to bring to the market would mean an immediate negative reaction by Wall Street. Businesses must be forced to disclose material adverse information on a prospectus, for instance, because the natural tendency of people is to hide the bad news so as not to risk doing business. I think it highly unlikely to expect to hear bad news from the oil industry, the incentives and penalties all line up to hide bad news not to be forthcoming about it.

For bureaucrats, they have different forces at work but the primary reason they stay silent is because no one gets credit for exposing a danger if the danger fails to come to pass. The risk of a danger not happening and looking like a fool is just too great. So bureaucrats and politicians are trained very quickly by their constituents to be very conservative. Stick one's neck out and it will get handed back to you. The public is very unforgiving on this score.

And it's not just in government. I have had many conversations with business people who understand and agree with what I am saying and when I ask them, "Will you say something about this?" they reply, "No way. What if you're wrong?"

I assure you there are many people out there currently participating in this conspiracy of silence. The background feeling is that it's ok to miss a big danger if everyone else misses it, too. After all, how could I be blamed for not speaking up when no else was speaking up?

And for both groups no one wants to be the person who shuts down the party. This is, I think, a big reason why the real estate/credit bubble we are seeing burst went on so long. Of course some participants just wanted to get their share out before the bubble pops, others actually can't see the problem and the ones who saw the problem mostly stayed silent, too, or were silenced (i.e. fired, told their opinion should be kept to themselves, etc.).

To see how people who raise the alarm are treated and why there are so few whistleblowers/alarm raisers of any sort, watch how Peter Schiff was treated in this video:
http://www.youtube.com/watch?v=2I0QN-FYkpw

Of course he was exactly right. He spotted the trends, saw the peak in the US economy and was ridiculed. How many people have the courage of their convictions to endure that? It take a lot of courage to say something in the face of no agreement and not many people have it. Researchers who examine planetary trends (Club of Rome, Limits to Growth) are regularly called fear mongers. Humans aren't wired to hear bad news and actively avoid it until it's too late.

I assert that the near-term oil models make tremendous sense when one really looks into them and the far peak models require the kind of misplaced optimism (I would actually say poor analysis) that was demonstrated by the people in the video above.

Declining top line production (64 of 98 countries already past their peak and growing), declining net exports, decreasing net energy (aka energy returned on energy invested), how late the hour is, how poor the alternative energy sources are when compared to fossil fuels, the contraction of credit that would have enabled us to kick our fossil fuel dependency: all are conspiring to make life in the next decade very difficult indeed.

-André