Every day now, the headlines report the record price of oil with the usual list of “causes.” Iraq…Yukos…Venezuela…security concerns…. The one “cause” that no one is mentioning is that world demand for oil has finally started to outstrip the supply.
Anyone interested in the story behind the story might want to take a look at the website of Matthew R. Simmons of Simmons & Company International, (http://www.simmonsco-intl.com/research.aspx?Type=msspeeches).
A company that offers management and financial consultancy to the energy industry, with head offices in Houston, Texas, may not be where you would expect to find an energy maverick, but Matthew Simmons seems to be one.
In the mid-1990s, Simmons realized that so many of the accepted figures about oil reserves – on which everyone was relying to make their predictions – were so questionable, he decided to research the subject himself.
What he has discovered is that we are flying blind. No one really knows what is going on. And what we do know isn’t close to what people generally “believe” to be the case.
Essentially, Simmons is saying that no one really knows how much oil there is in the ground in the world, or how easily (and cheaply) it can be extracted. Moreover, what we do know suggests that we don’t have as much oil available as most experts had assumed up to now.
His main point is that it seems quite possible/probable, depending on which facts are correct, that oil production in the world is peaking, or is about to peak.
For Simmons, the recent case where Shell had to reduce the estimate of its reserves was just symptomatic of the fog.
The results of his work have staggering, long-term implications, which each headline after another tries to conceal. But for how long?
It is as if, suddenly, the whole world is about to understand exactly what Simmons has been saying: that there is so much unreliable data out there that anything could be going on and we wouldn’t know we had run out till the tap ran dry. Hello?
Basically the world appears to be consuming about 82 million barrels a day, and producing about the same quantity. So, when OPEC recently admitted it couldn’t increase production very much, it made you think of Simmons.
Each mention of “Yukos,” or “Iraq,” or “security concerns” in association with “today’s new high” is just evidence we are not seeing the big picture. The real story is not that there are some glitches somewhere in the world oil business today, but that supply and demand are now so finely balanced that even small disruptions in the supply push the price of oil up. “Yukos” is not the problem. Excess demand over supply is the problem.
And “the big picture”?
Consider one of Simmons’ sample scenarios: For China and India to reach the per capita oil consumption of a country like Mexico today, itself a modest per capita user by international standards, world oil production would have to be 50% higher than today! Just as world production is, or soon will be, falling.
Anyway, the drift is pretty clear. The new era may have begun at last: we are running out of oil. Or perhaps more accurately, we are running out of affordable oil.
And as one humorist put it: the Stone Age didn’t end because we ran out of stones.
So the inevitable move into non-oil energy sources can only accelerate. All of which will be good for limiting climate change.
Meanwhile the effects on the world economy could be severe. When you are flying blind, who knows who is going to get hit.
Another long-term development will be political. Once the US bites the bullet on its oil dependency, the changes could be extraordinary. Can you imagine the US Middle East policy with no oil interest? “What Middle East?”
And who will put a price on the “War on Terror”? A war that was declared against the presence of Western Culture in the Middle East? Anyone short of sand?
Then who defends Israel? Is that why Iran is now talking about its own Bush doctrine of preemptive strikes to defend its nuclear program? Might sure speed up a settlement to the Israeli-Palestinian conflict.
On a lighter note, there was a great interview on the BBC recently about the alternatives to fossil fuel for energy.
Solar is the answer, said the professor being interviewed. When you do the math there is no doubt that the endless flow of the Sun’s energy far outstrips all other renewable options. And luckily, he said, the sun tends to fall abundantly on the poor parts of the globe that really need the energy. Right, said the journalist, solar panels are clearly the way to go.
No, says the professor. Using technology to turn sunlight into energy is very inefficient. By contrast, biology is wonderful at this. Think of what trees do with sunlight in terms of converting solar energy into different chemicals. So, very simply, we will be able to genetically engineer trees that will use the sunlight to provide the energy sources we need.
I couldn’t work out whether we would just take our cars up to the tree and “fill ‘er up” from there or what? The mind boggles. Then again, we are just entering some mind-boggling times.
And why are we flying blind…at “the controls” of Planet Earth? Wouldn’t it be smart to be conscious of the effects of our own actions on the only planet we have?
The end of oil, climate change, economic stagnation… you would imagine this list should be at the top of any and every agenda.
And why isn’t it? Just listen to the media debate currently going on for President of the USA – or perhaps for any political office anywhere for that matter. It is like watching a crime in slow motion to see this trivialization of “the news” – while Rome burns.
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