Emergency planning
Hi, Steve
Thanks for your latest (and very thorough) response.
Re your location, I think you once mentioned that you live in SE Asia… Philippines??
Or am I wrong on that?
1. Contracts vs spot market
I don’t think that we should discount the value of contracts. Sure, they can and are broken, but rarely without a range of consequences (if only a simple loss of trust).
Concern has recently been expressed by the Brits re their NG supply: France and other countries have contracts with Norway, while the UK prefers to shop around.
Both the mainland Europeans and the Brits view Norway as a preferred, trustworthy supplier, but British citizens worry that their gov’t has not signed contracts, and in a supply pinch (they’ve had several) they will be the last served.
As they should be….
2. China
I agree with everything you say… the economic symbiosis and China’s naval limitations (though that seems to be changing… you will know much more about those details than I)
I even (reluctantly) agree with your point in the post-script.
From a practical oil-supply perspective, you are certainly correct.
From a moral stand-point, less so, but so far we have not really explored that aspect.
3. Cold War thinking
I agree again… with a global market for oil, there is little to be gained by interfering with “anyone else’s” supply.
4. Fuel emergencies
Again, I agree with most of your points… as I said in that ASPO-Denver video, there will always be some oil available to some people at some price.
But I’m not so sure that I agree with your argument that micro-planning keeps emergency managers happy.
Almost every emergency planner that I’ve spoken with (in your country and mine) agrees that a fuel emergency could be a whopper of a problem, and that current plans are inadequate.
But they also say that they are strained to the limit with paperwork, exercises and training sessions, much of which (recently) centered around pandemics (SARS and H1N1)… no time to examine something which seems fairly predictable at some point and for which we remain quite unprepared.
Every planner that I have met strikes me as sincere and is aware of the vulnerabilities, and they know that they will be the first ones criticized if the response at their level is revealed to be ill-conceived or negligently under-prepared for.
I do not envy them.
But returning to my example of farmers…you are right about low-income consumers dropping out of the market.
That is precisely the point: we will have movie stars and NBA hot-shots who can still drive Hummers, but thousands of farmers will struggle to put diesel in their John Deere to produce food.
North America still has to be fed, but how will that be done if the price of diesel is beyond the reach of most farmers?
We really do need an effective plan for this one, and the micro aspects (esp. re essential services like food) need to be considered and sensibly addressed... well in advance.
JFQ on DoD energy
Thanks to Andy Bochman at DOD Energy Blog, I was just alerted to this thoughtful article by Amory Lovins in the new issue of Joint Force Quarterly (re. DoD fossil fuel use and what can be done about it):
http://www.ndu.edu/press/jfq_pages/e...i57/lovins.pdf
Yes, little mountain village in the northern Philippines. Make a couple of visits a year to the Middle East, other than that I work on line, which is way better than being full time in the ME!Originally Posted by Rick M
Agreed, not totally discounted, but not overly counted upon either. Norway is of course regarded as a reliable contract partner, something of a rarity in the energy producing world, which is why their contracts are sought after.
Europe's NG situation poses certain unique challenges. Gas is a bit different from oil, especially when it's delivered by pipeline: the pipeline only goes where it goes, which locks in supplier/consumer relations to a greater extent than we see in oil markets, which deliver primarily by tanker. Europe has access to Russian gas and Central Asian gas piped through Russia, but of course nobody trusts the Russians, hence the rush to gain the upper hand in non-Russia-dependent supply. Of course if the Russians play games it's possible to get gas shipped from Qatar or Iran, but that takes time and if the Russians are playing games there will be other users likely to be after the same gas, aside form the political issues in dealing with Iran. Gas is in many ways a preferable fuel for many uses, but the politics of transporting it can be on the insecure side.
Yes, the moral aspect of it is disquieting, but it's not something we can do a great deal about. I've said this before, but I really wonder how these deals will work out for the Chinese: American and European companies had their share of amoral dealings, and they didn't always come out well when the governments doing the dealing came apart, and the new governments didn't want to deal with people who supported their abhorrent predecessors. It wouldn't half surprise me to see some Chinese investments nationalized down the line, and some supply commitments broken. When it comes to contracts, Angola ain't Norway.
China is substantially upgrading their Navy, but not to the extent that would allow them to undertake major military interventions in oil-producing areas in Africa or the ME. In any event this would be horrendously expensive and risky for the Chinese, and I have trouble seeing a scenario where costs, risk, and benefit would support a military intervention scenario. Far easier to compete with dollars than with guns, not like they have a dollar shortage. For the Chinese, of course, any military adventure that interrupted their trade receipts would be suicidal: they can keep internal dissent bottled up as long as the economy is roaring along, but the internal security ramifications of a major trade disruption would be a huge problem.
As I said, I don't think the plans will be followed in any event, so it is largely an academic exercise. We also have to consider that any plan involving rationing or other prioritization of use has to remain secret, as the political penalties involved in openly discussing such matters far outweigh the benefits. No administration wants to stick their neck out and tell the vast bulk of wasteful American energy users that they are going to be at the bottom of the allocation list when the merde hits the fan, they know full well they'd be crucified and gain nothing.
Again, at the end of the day we either allocate reserves to be sold at low cost to high priority/low income users such as farmers and truckers, or we subsidize their purchases. The latter is more likely, and simpler: at the end of the day it's easier, more practical, and more accurate to see the challenge as one of rationing dollars, rather than one of rationing fuel. Dispensing dollars, of course, is one thing the US Government is pretty good at, or should be: they've certainly had enough practice!
Missing pieces
This thread has been a great learning device, but I am surprised at what is not mentioned---consumer responses to price.
I spent the 1970's in Germany, where prices were so high that no one could ignore conservation. If you lived in an apartment building with central heating, the thermostat went to "off" at 11 pm, so it was time for a thick blanket and a warm companion, just like in the old days.
Two years ago, I came home on leave to my suburban Maryland neighborhood to find gas prices around four dollars, so people changed habits. Of the SUV and prius/civic hybrids in the driveway, the SUV sat more of the time, and there were a lot more econo-boxes on the road, and less road miles driven.
For the last year, prices have been below $3, and people are back to the old ways, but there is always a 10% (and possibly 20%) consumer response range just from simple things like turning down thermostats, chaining trips, and using the hybrid instead of the SUV for elective trips.
While the big picture on the oil production side remains important, it is not the only big piece of the puzzle.
Behind that, of course, we had a lot of Illinois farm coops who lost money last year on ethanol coops when prices declined, and the pending expansion of Iraqi oil production over the next decade.
Complicated.
UK motorists mugged?
This story appeared today 'Petrol to hit 120p a litre, as motorists 'mugged' by oil companies' and subtitled (US price est. $6.84 a gallon)Read on for US readers I expect UK prices will shock.Petrol is due to hit a record of 120p a litre in a matter of days, even though the price of oil is little more than half the levels it was at its peak, the AA motoring group has warned.Link:http://www.telegraph.co.uk/motoring/...companies.htmlThe average petrol price across the country is 115.9p for a litre of unleaded and 116.6p for a litre of diesel, according to Petrolprices.com. However, the Treasury is due to add a further 3p on April 1.....In the summer of 2008, when petrol prices hit their record level, duty was 50.35p a litre. Since then it has climbed to 56.19p, with it due to hit 59p next month.
A moment with the calculator gave the gallon prices and the exchange rate.
Last edited by davidbfpo; 03-16-2010 at 02:08 PM. Reason: Spelling
davidbfpo
Nobody really knows how much Iraqi oil is going to come to market, or when... there are a lot of unknowns in that picture, many revolving around security and political stability. With luck, increased Iraqi production may offset decreasing production in Mexico, Venezuela, the North Sea, and other mature fields.
A more likely source of increased production is the GCC, where large investments have been made in increased capacity. The Saudis are targeting 16mbpd... not that they want to pump that much on a regular basis, but the capacity allows them to bring in a lot of money during price spikes, and having the world's only significant excess capacity gives them a lot of political leverage.
Your other point brings up one of the most interesting questions to emerge from the recent price spike. In theory, both production and consumption should be elastic relative to price: higher prices should drive increased production and reduced consumption. During the recent price spike, some SUVs may have stayed in the garage, but overall global demand kept right on rising, even at well over $100/bbl, until the financial system tanked and recession set in. We also saw that in the first half of 2008 production in many key areas declined, even as prices rose. This was interpreted by some as evidence that production had maxed out and could no longer be increased.
Some say the theoretical elasticities are no longer real or relevant. I disagree. My own theory is more or less as follows... only my own and doubtless flawed.
What's often forgotten in this picture is that our patterns of consumption and production were heavily shaped by the 90s energy glut. Remember $25/bbl? It wasn't that long ago. For over 10 years exploration and investment in new production capacity ground to a halt - producers didn't have the money or the incentive. Growing economies like those of China and India grew into the assumption of cheap oil, and habits in the West became entrenched.
When prices started curving up in the early 00s, most analysts saw it as a risk premium related to the US response to 9/11, and expected it to be temporary. It wasn't really til 2005-2006 that people really caught on to the fact that demand was outstripping available supply and prices were set to keep on rising.
On the consumption side, the response to higher energy prices was to cut back elsewhere, borrow money, print money, keep on buying. It was a time of very high liquidity and most consumers simply weren't able or willing to adjust fast.
In terms of production, we often forget that there's a considerable time lag between the decision to invest in exploration and new infrastructure and the appearance of new oil. The production increases in the early part of the price spike weren't new production coming onstream, they were achieved by running existing infrastructure at 100% capacity 24/7/365. Production eventually declined despite higher prices not because the oil was running out, but because if you run any complex mechanical system at that level for long enough, things start to break and you have to pull systems offline for maintenance, sometimes on a large scale.
What all this adds up to, IMO to the second power, is that the elasticities are there, but they are delayed. Higher prices will drive consumption down eventually, but not immediately: in the short run consumers will just bite the bullet and pay the price. Higher prices will call up more production eventually, but it may take years between decision and production.
For this reason, I always argue that on a policy level we need to sustain high energy prices in order to bring these elasticities into play, raising production (and investment in alternatives) and trimming consumption. That would mean radical production cuts and if necessary high taxes on energy during periods of low prices, ideally by international consensus but unilaterally if necessary. Of course the political will to sustain this sort of policy is... well, questionable at best.
Last edited by Dayuhan; 03-16-2010 at 10:38 AM.
New study on oil demand
Thanks for your comments, all of you.
I will have to hold my observations for 6 hours or so... it's beautiful outside and we are replacing a barn door, so I'm on the run.
But this was just posted... new study re oil demand.
I have not read it, only the synopses at EB:
http://www.energybulletin.net/node/51992
This touches on something that I was going to include in my observations anyway... that oil is so special (so energy-dense, versatile, safe, portable, etc) that it will be very difficult to "leave it."
Our recessionary drop from 86 to 84 indicates that even in very desperate times, we still consume 97% of what we did when things were 'normal.'
Given its "energy slave" value, even $100 oil is a gross under-valuation of the vital work that it does for us.
Gotta run... see what you guys think of this new study.
The new JOE on oil supply
It's getting late... don't know if I can respond to your points before I fade.
I've spent the last several hours doing a review of the energy section in the new JOE, which I just spotted in the late afternoon.
It should be posted on EB in the morning... these are my observations:
The Joint Operating Environment 2010: Oil Supply Concerns
The February 2010 version of the Joint Operating Environment (JOE) is fundamentally similar to its predecessor, which was released in November, 2008.
Its overall structure is only slightly altered, and much of the text is identical.
Amid the multitude of security concerns, petroleum supply has moved rapidly to the forefront, and it is this issue which is the focus of this review.
The main oil supply vulnerabilities which were cited in 2008 are reiterated, thus indicating that there has been no amelioration.
It states that “oil and coal will continue to drive the energy train” until 2030, though it warns that in order to do so, “the world would need to add roughly the equivalent of Saudi Arabia’s current production every seven years” (p. 24).
Significantly, a text box has been added entitled, “Peak Oil” which states in part: “… Assuming the most optimistic scenario for improved petroleum production … [it] will be hard pressed to meet the expected demand of 118 million barrels per day [in 2030].” (emphasis added)
The JOE also states, “The central problem for the coming decade will not be a lack of petroleum reserves, but rather a shortage of drilling platforms, engineers and refining capacity” (p. 24).
Many peak oil analysts, including this reviewer, would agree with that statement. There is enough oil to get us through this decade, but a decade is a very brief period in time.
The following decade could be a very different story.
Drilling platforms and experienced engineers will indeed be at a premium, since land-based and shallow-water options seem be running out.
As for refining capacity, we seem to be going the other way, with refiners struggling and numerous closures world-wide.
A graph at the bottom of page 25 illustrates the precipitous drop in production from existing wells and the relatively small flow which can be obtained from non-conventional oil.
Given the ongoing use of natural gas to produce bitumen, the contribution of non-conventional oil would be even less significant if “net energy” were factored in.
The text box on Possible Future Energy Resources is similar to its 2008 predecessor and again highlights the fact that despite intensive research and improved efficiencies, the contributions of oil sands and shale, biofuels, wind and solar will be minimal.
The JOE then warns, “A severe energy crunch is inevitable without a massive expansion of production and refining capacity” (p. 28).
To add to the urgency, it restates its 2008 warning, “By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD” (p. 29).
This warning is entirely consistent with others which have been voiced during the past 18 months (eg. the repeated verbal statements made by IEA chief economist Fatih Birol, the 2008 WEO, Paul Stevens of Chatham House, etc.).
Unfortunately, the JOE again fails to address two obvious “next questions:”
- To what degree might a global supply crunch constrict oil exports?, and
- How can we best prepare for and administer a liquid fuel emergency?
Both questions need to be addressed urgently, regardless of how close we are to peak oil.
While the JOE warns, “The implications for future conflict are ominous,” it fails to mention the internal strains which an oil supply crunch could place on civil order at home.
It acknowledges the potential for a prolonged US recession, deep cuts to defense spending, diminished capabilities “at the moment they may have to undertake increasingly dangerous missions” (p. 28).
However, the JOE makes no mention of the potential threat to civil order on the home front.
The difficulty of maintaining the domestic food supply chain and other essential services in the face of unprecedented energy prices needs to be considered as a reasonably probable piece of the future operating environment, given that the JOE’s own evidence points to a high probability of the very circumstances which could trigger such conditions.
The JOE’s Energy Summary is not optimistic.
It does not mention peak oil a second time, but reiterates its prior warning that “production could reach a prolonged plateau. By 2030, the world will require production of 118 MBD, but energy producers may only be producing 100 MBD unless there are major changes in current investment and drilling capacity” (p. 29).
In short, raising the profile of oil supply problems within the JOE is a helpful step. Perhaps civilian as well as military planners will take note.
The entire document is a curious mix of philosophical quotes, a hard-nosed assessment of some very formidable issues, and some very astute lessons from history.
For many decades, cheap fossil fuel has been something which we have taken for granted: for most of us, it’s simply another bill to pay.
Suddenly, concerns about its future availability are rocketing to the forefront. If nothing else, those lessons from history should warn us of our human tendency to see what we want to see.
What many of us see is an endless supply of cheap oil for our grandchildren and beyond.
This JOE prudently encourages us to look again….
Here is the link:
http://www.jfcom.mil/newslink/storya...JOE_2010_o.pdf
Fuel emergencies
Steve/Planner:
I agree with your points about price and about the 10-20% response range.
Even on a farm, where most of what we do is essential (and most family farmers cannot afford to waste money), we all made changes during the summer of 08.
But once we are below that range, and are into the 80% that we really can’t give much more on, then the high cost of fuel really bites. Cows must be fed, hay must be made and transported to them, and we still need furnace oil.
You are right about the ethanol co-ops… same thing here in Ontario.
So farmers are squeezed on many fronts, which is why so few young folks want to do it (or can afford to do it).
But food must come from somewhere, which takes me to the other Steve’s points.
Steve/Dayuhan:
I agree with all of your points until we get the emergency plans.
Alan Smart has done extensive work for the Australian gov’t, and he stresses several things:
1. Legislative homework
Step one is ensuring that you have legal authority to do what must be done.
Anyone who thinks that gov’t is acting in an arbitrary, discriminatory manner can and will appeal for an injunction, probably at the very moment when gov’t needs scope of action.
Alan says we need a solid legal framework, mirrored at the state and local levels as well.
2. Informing the public
Far from keeping the plan secret, Alan (and others) point to the need to keep the public informed in advance as to the potential of a liquid fuel emergency (LFE) and how the gov’t intends to deal with one.
As he points out (and I used the quote in the Denver presentation), people have a responsibility to do their own contingency planning, but we cannot expect them to do so if they have no idea how the larger gov’t plan is supposed to operate.
The legislative framework can’t be kept secret, at least not in a democracy.
That said, much of the UK plan remains restricted. I assume (but cannot know) that they have criteria defined in terms of who is/is not an Essential User.
I think they should let the public be aware and get the legal challenges out of the way before-hand, but they have their reasons.
3. Politics
I agree re. the political backfire, but that just confirms why we need to raise & address this issue well in advance. If citizens are so self-centered that they won’t accept a politician who is up-front about discussing hard choices and the national interest, then what hope is there of orderly administration during an actual LFE?
4. Rationing dollars vs fuel
You are correct about it being easier to ration dollars vs fuel.
The easiest and most likely mechanism would be an end-of-year tax credit, based on income tax.
But this raises all sorts of complexities:
- people have to up-front the money and wait many months for a rebate to arrive.
- Many low-income people don’t own cars… do they get the rebate?
- People may believe that the economy will collapse and not trust that a rebate will ever be forthcoming. This belief will achieve the goal of cutting consumption, but it may cripple other goals (eg. of maintaining food production and social order). People can only do what they can afford to do.
Your first option (of allocating subsidized fuel to high priority/low income users) is what is needed, but the administrative and legal complexities will be enormous.
As GAO pointed out, such a immense task may be beyond the capacity of any organization.
All the more reason to get a much better brain than mine on this….
I’ve read & thought about this issue for some time and I certainly can’t see a clear solution, though I do see bits here and there that should help.
I also think that military logisticians could be invaluable in putting together a reasonably effective civilian LFE plan.
6. Higher prices
David’s info about UK prices fits with your call for sustained higher prices.
Kathy Leotta in Washington State did an excellent study on transport options for an LFE, but she points out that near-term responses are very limited.
She says that to build effective resilience, we need about a decade of work, but we can’t even start that decade until people accept higher prices.
Hirsch and Simmons say the same thing… price volatility undermines a lot of progressive action.
That’s about it… thanks to you all for your interest & ideas.
Essential Users
RickM,
I am reasonably sure the UK has defined 'essential user' and the fuel emergency plans had an "outing" in 2000 when a sudden protest by farmers initially, joined by hauliers quite literally nearly stopped the UK. Here is one link:http://news.bbc.co.uk/1/hi/uk/924574.stm(One passage only). That said, much of the UK plan remains restricted. I assume (but cannot know) that they have criteria defined in terms of who is/is not an Essential User.
The UK plans were then explained to a limited audience, mainly within the fuel supply industry, as supplies dwindled and we edged towards declaring a State of Emergency. The most visible sign was the designation of a few petrol stations as only for 'essential users' and steps to ensure emergency serives, hospitals etc had supplies.
I would expect far more is in the public domain, but have not delved further.
davidbfpo
UK fuel emergency plan
Thanks for that, David
The BBC link gives a very good synopsis.
If you were in UK at the time (I don't know if are English or have moved there), I would appreciate your first-hand observations (and am happy to pay for a phone-call so you don't have to write it).
My gov't did a lessons learned thing (though it took them over 4 years to get around to it) which gives more detailed info:
http://www.publicsafety.gc.ca/prg/em...5-001-eng.aspx
Meanwhile, if you are familiar with the current UK Resiliency model, then I would really appreciate your observations on that as well.
Finally, are you familiar with the recent "Heads in Sand" study on UK energy security:
http://www.globalwitness.org/media_l...n_the_climate_
I appreciate your interest, David
UK calling
I am a Brit and have PM'd in response.
davidbfpo
The problem, of course, is the possibility that Government may turn around and apply that scope of action in ways that really are arbitrary and discriminatory. Americans do not entirely trust their government, nor should they.
I think the entire idea of a "LFE" may be deceptive, and may lead us to prepare for the wrong emergency. We need to remember that we're not looking at a lines-at-pumps fuel shortage, and if we prepare for that we're "preparing for the last war". Might be more useful to think of a "Liquid Finance Emergency".
I don't see that as practical, for all the reasons you mention and a few more.
One possibility would be a subsidized price for diesel, generally a "working fuel". Drawback of course is that not all diesel vehicles are for work, and that not all working vehicles are diesel.
A more likely option would be a two-tier price at the pump, with identified "priority users" paying less and government making up the difference to the oil companies. Of course you have to identify "priority users", and brace for the inevitable deluge of people trying to pressure or squeeze their way onto the priority list.
There will always be drawbacks, no perfect plan or device.
Of course no plan to identify "priority users" is going to be openly discussed by politicians, who would face an immediate and hideous backlash from the larger number of non-priority users. It doesn't help that in the US at least the public is for the most part convinced that there is no real fuel problem, and it's all a conspiracy between Evil Bigoil and the vile Ay-rab, who of course control the Guvvermint. The unpopularity of the oil companies is a real obstacle: government has to work with the companies to effectively prepare, but visible proximity to an oil company is politically unacceptable.
more on LFEs
To David, thanks very much for your UK info… very helpful.
To Steve, thanks for your usual detailed response.
On your first point, that’s exactly why we need a plan, if only some general guidelines as to what gov’t plans to do & not do.
Then the public knows what it’s likely facing, we can plan (or decline to) accordingly, and the gov’t should be less likely to act in ways which are arbitrary and/or discriminatory.
They will be inviting legal action if they do, so it’s hardly in their interest not to tighten up the legalities well in advance.
On your second, I don’t see why lines-at-pumps cannot occur again.
Fuel is something that few of us can do without, and there is a limit to what we can curtail. What we should expect is a surge in people pulling “zoomers” (driving off without paying, often without replacing the nozzle).
This would bring a quick end to self-serve, and if there were other obstacles to easy service (prepayment, limits on purchase, restrictions on containers, etc), the whole refueling process could certainly bog down and cause extensive line-ups, even though people were buying less of it.
On your third point, I think we’d need not only a two-tiered price, but they had better be in different locations to avoid hassles at the pumps.
The Brits have about 800 Designated Filling Stations (DFSs) for blue-light vehicles only (only in the event of an emergency, but they have been pre-identified and authorized).
We should have such provisions here.
I also think that we need a ready-to-go system for farmers: we use a special fuel (off-road diesel) which is delivered to the farm, and most farmers are registered with the gov’t, so they know who & where we are (and could easily find out how much we usually consume to prevent barnyard “entrepreneurship”).
But you are absolutely correct re no perfect plan.
Apart from the certain aspects (pollution, urban sprawl, rapid resource depletion, obesity… all minor concerns… definitely joking) what we have now is the perfect system: just swipe a card and drive away…. good for another week.
Gen. Wesley Clark on energy security (video)
One of Canada’s finest journalists is Steve Paikin at TV-Ontario.
In October 2009 he interviewed Gen. Wesley Clark (Ret) on the topic of energy security (28 mins).
This interview is currently posted at the Journal of Energy Security.
Gen. Clark has an excellent grasp of these complex issues and some very clear ideas about what we can and should do about them.
The topics discussed (with start-times) are:
1m – history of US oil supply
5m – resource nationalism
10m – role of Canada (tar sands, etc)
13m – nuclear
16m – ethanol, transport fleet
19m – corn production
20m – US total energy consumption, alt energy, transportation vs stationary
24m – Clark’s investments & interests
25m – opposing interests & political change
27m – climate change threat
Here is the link:
http://www.ensec.org/
UK progress on peak oil
The UK Industry Task-Force on Peak Oil and Energy Security (ITPOES) continues to make good progress.
Their second report was issued last fall and reiterated their concern that the UK gov't is much too complacent on PO.
The UK energy minister has suddenly agreed to meet with ITPOES in a private session, which they will do tomorrow:
http://www.guardian.co.uk/business/2...eak-oil-summit
I have just written to one of the ITPOES members to suggest that they endorse the idea which was put forward by an RAF officer in his 2009 thesis that Defence be included in gov't examinations of energy security. (MOD has so far been excluded.)
Defence analysts could provide a unique and invaluable perspective amidst the usual gathering of politicians, bureaucrats and industrialists.
USNORTHCOM Electric Energy Security in the Domestic Theater
Some really neat graphics and outlines in Northern Commands report.
A good explanation of smart grid for installations as well.
It's a good overview.
PFC Report for International Energy Forum
First, thanks for your info on grid vulnerabilities, CD.
Your link confirms the concerns expressed at the Oct. 09 ASPO conference by a Homeland Security analyst... there are some very serious grid vulnerabilities with direct relevance to domestic base installations.
Meanwhile, I want to offer this, a petroleum study commissioned for last week's International Energy Forum which was held in Cancun, Mexico.
Some of the key points made in the IEF report by PFC Energy are (emphasis added):
- because of "a consistent set of trends" the PFC Energy projection is much less optimistic than those made by either the IEA or OPEC: "The divergences in supply forecasts are stark and significant.... PFC Energy sees liquids output at 89.8 mmb/d in 2030, after peaking between 2020-2025 around 95.0 mmb/d" (p. 9).
- "the fact that so much of the world's production is probably on irreversible decline is the key factor in restraining global output growth" (p. 10).
- "the challenge [of the plateau and onset of irreversible decline] is coming, and this emerging world of limited conventional production will require major adjustments..." (p. 13).
- "governments [must] appreciate the gravity of the challenge and the need for immediate and concerted policy initiatives..." (p. 13).
The original PFC Energy report is available here:
http://www.ief.org/whatsnew/Document...ertainties.pdf
Tomorrow a letter will be sent to Canada's energy minister, asking how this PFC assessment (and the abundance of prior warnings, both civilian and military) fits with the Canadian government's ongoing position that "there is no peak oil challenge."
I will let you know what answer I receive, if any.
Last week's International Energy Forum
The letter below was sent this morning to Canada's Minister of Natural Resources, in connection with the PFC study which was commissioned for last week's International Energy Forum in Mexico.
Dear Minister Paradis
I have just finished reading the report commissioned by the International Energy Forum entitled Unpacking Uncertainty: Investment Issues in the Petroleum Sector.
This report was authored by PFC Energy in July 2009 (44 pgs) and it is my understanding that it was the subject of some analysis by the world's energy ministers (including yourself) at the International Energy Forum in Cancun, Mexico last week.
As you are aware, some of the key points made by PFC Energy are (emphasis added):
- because of "a consistent set of trends" the PFC Energy projection is much less optimistic than those made by either the IEA or OPEC: "The divergences in supply forecasts are stark and significant.... PFC Energy sees liquids output at 89.8 mmb/d in 2030, after peaking between 2020-2025 around 95.0 mmb/d" (p. 9).
- "the fact that so much of the world's production is probably on irreversible decline is the key factor in restraining global output growth" (p. 10).
- "the challenge [of the plateau and onset of irreversible decline] is coming, and this emerging world of limited conventional production will require major adjustments..." (p. 13).
- "governments [must] appreciate the gravity of the challenge and the need for immediate and concerted policy initiatives..." (p. 13).
These expressions of concern (and there have been many others since the release of the Hirsch Report five years ago) are not reflected in the position or policies of your department.
Since your Ministry has the lead on energy issues, other departments (eg. Agriculture and Agri-food Canada) are unable to incorporate these concerns in their policies or even their research.
For years, the position of Natural Resources Canada has been that "there is no imminent peak oil challenge" and therefore there is no need for a formal examination of the issue.
As you are aware, other jurisdictions (USA, Australia, UK) have conducted thorough analyses and concluded that the peaking of global oil production constitutes "an unprecedented risk management problem" (Hirsch Report, p. 4).
The ongoing complacency of our federal government is no doubt due to the tar sands, which represent Canada’s only hope of growing production given that conventional oil production has been in decline for decades (even considering the relatively minor amounts of new east coast production).
I and others who have expressed concern about peak oil to your Department are invariably told that thanks to the tar sands, "Canada's oil supply is secure for about 200 years."
However, this argument fails to account for the fact that oil is a globally priced commodity and there are no plans for government intervention with respect to oil pricing or security of supply.
All Canadians, including our essential service providers and our hard-pressed farmers, must pay the world price, which can be expected to increase substantially due to peak oil, followed by potential physical supply disruptions.
Furthermore, eastern Canada is not served with tar sands oil and in fact is highly dependent on imported oil, and (pipeline logistics aside) NAFTA constrains the shifting of production from exports to the USA to serve eastern Canada.
Consequently, my request is both prudent and direct:
In light of the information in the PFC Energy report, the discussions which took place in Cancun, the growing body of evidence which points to both a near-term supply crunch (2011-2015) and a likely peak in global oil production within the next decade, and the vulnerability of all Canadians to an oil price spike, will your department now conduct a formal analysis of peak oil and how our nation can best deal with its expected effects?
- Rick Munroe
National Farmers Union
Howe Island, Ontario
Last edited by Rick M; 04-07-2010 at 10:52 PM.
I realize that analysts have to make brave predictions... but I really don't think anyone's prediction of available energy supply 15 to 20 years from now means very much.
We tend to forget the glut. It seems a long time ago, but today's energy matrix is inextricably connected to it and shaped by it. For close to two decades - effectively about 86 through 06 - investment in exploration, production, new technologies, and both conventional and renewable alternatives virtually stopped - there was simply no economic justification for it. Even when prices curved up in 02-03 most people saw it as a risk premium associated with the US response to 9/11; it wasn't til 06 or so that it really sank in that the glut is done.
Today, of course, we all know the glut is gone, and for the first time since the mid 80s, real effort, real money, and a vast array of improved technologies are being applied to energy problems. A lot of this will go to oil: finding new oil, reducing the extraction and processing cost for the oil that we now say is difficult or expensive, and increasing the recoverable percentage of known reserves. A lot of it will go to conventional alternatives: hydro, geothermal, finding ways to make nuclear affordable and coal acceptable. A lot will go to non-conventional alternatives: wind, solar, waves, tides, etc.
In all cases, nobody can say what the payoff will be. We just don't know. Given the extended neglect and the considerably improved level of technology since the last time these matters received serious attention, I think we'll seeing a wave of very interesting stuff emerging around 2015-2020... maybe some hints and pieces before then, but this stuff doesn't happen overnight.
All I'm saying is that if we extrapolate from what is now known and now possible we ignore the reality that what we have now is the fruit of 2 decades of neglect. The answer to that is not to assume that this is all that can be, but to end the neglect.
At the moment we have some breathing space. Prices are at a sort of sweet spot: high enough to support significant investment and significant conservation, not so high that economies are crippled. There's still a bit of reserve: OPEC quotas are below maximum output and Gulf producers have been putting real money into new capacity. We need to make use of that breathing space and actively shape the medium and long term future, not simply assume that what will be is a linear continuation of the recent past.
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