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Tilting at Windmills

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September 11, 2007
By: Kevin Drum

PEAK OIL WATCH....OPEC agreed today to increase oil production by 500,000 barrels per day. But check out this sentence in the New York Times coverage:

Consuming nations, including the United States, have been urging OPEC producers to put more oil on the market, warning that the winter months would see a big jump in consumption that non-OPEC producers would not be able to meet.

Note that this is now apparently conventional wisdom: the only spare oil production capacity left in the world is in OPEC. The non-OPEC peak isn't five years off, or ten years off. It's now.

Kevin Drum 5:01 PM Permalink | Trackbacks | Comments (42)

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Because they keep their cards so close to the vest we don't know for sure but I have heard rumours that the Saudis are already on the other side.

Alternative energy program anyone?

Posted by: corpus juris on September 11, 2007 at 5:13 PM | PERMALINK

The future is here.

Posted by: nutty little nut nut on September 11, 2007 at 5:15 PM | PERMALINK

Jim Kunstler has been trying to tell us this for some time now. Of course he gets dismissed as a crackpot alarmist. Telling the truth usually gets greeted thusly.

Posted by: steve duncan on September 11, 2007 at 5:15 PM | PERMALINK

If OPEC has peaked, then we have already hit Peak Oil. Indeed, some of the guys over at the Oil Drum have already posited that we hit the coventional oil peak in 2005. Regardless of whether we have hit the peak or not, tight oil supplies and dramatic growth in the number of people with cars worldwide is going to put significant upward pressure on the price of oil.

The real questions for me are:

(1) What can we do to adapt to spiraling oil prices ?

(2) What are we going to do ?

Personally, I'm hoping for plug-in hybrids, major advances in renewables/energy efficiency, and some greater awareness among the general public of our energy and environmental issues. Oh well, I can dream

Posted by: Anonymous on September 11, 2007 at 5:21 PM | PERMALINK

Just wait until the Arctic Ocean melts and we can start drilling there, then all you peak-oil conspiracy nuts will be exposed!

And never mind the irony of it, what with global warming and all.

Posted by: Joey Giraud on September 11, 2007 at 5:26 PM | PERMALINK

Peak oil is like global warming- it's just some leftist rhetoric meant to appeal to the environmentalists. There is no such thing as peak oil. Has anyone bothered to consider that if we just cut taxes to the oil companies then the free market will take care of it?

Posted by: tbrosz on September 11, 2007 at 5:40 PM | PERMALINK

Um...as Mr Drum observes, OPEC isn't at peak oil production.

...the only spare oil production capacity left in the world is in OPEC. The non-OPEC peak isn't five years off, or ten years off. It's now.

Of course OPEC will turn up the volume. Gotta manipulate the supply just enough to keep demand & price open to further manipulation. Any market-savvy crack dealer can tell you that.

Posted by: Monty on September 11, 2007 at 5:41 PM | PERMALINK

Yes, let's all believe the Saudis when they say they've got reserve capacity. They would never lie about that.

T-Bras, I'm sure no grown up has ever considered that the free market will take care of it.

Because the free market is a infantile libertarian fairy tale. "Don't worry Junior, the free market will keep the monsters away. Sleepy time now!"


Posted by: Joey Giraud on September 11, 2007 at 5:46 PM | PERMALINK

That fake tbrosz was so good, it makes me miss the real one. *sigh*

Posted by: Blue Girl, Red State (aka G.C.) on September 11, 2007 at 5:55 PM | PERMALINK

Oh - and Hubbert was an optimist.

Posted by: Blue Girl, Red State (aka G.C.) on September 11, 2007 at 5:57 PM | PERMALINK

What about the oil under the Arctic? Just curious.

Posted by: Gore/Edwards 08 on September 11, 2007 at 6:02 PM | PERMALINK

have you conflated oil in the ground with ability to produce? not saying you did, but the quote could point to either.

Posted by: miller on September 11, 2007 at 6:03 PM | PERMALINK

Awww, Joey beat me to it.

Thanks to global warming, we'll soon be able to drill in the arctic for more oil! Win-win!

Posted by: Disputo on September 11, 2007 at 6:09 PM | PERMALINK

Bikes and sweaters. Biking's good for your heart anyway, wouldn't want to end up like Cheney.

Posted by: dr2chase on September 11, 2007 at 6:24 PM | PERMALINK

Kevin,

I think you're confusing the lack of "surge" capacity with "oil peak". Non-OPEC producers have fields they haven't yet tapped, but they can't get them on-line in a few months. OPEC does have the capacity to quickly increase production, but others may be able to do so over years instead of months -- at least, the article doesn't say otherwise.

Posted by: Shelby on September 11, 2007 at 6:30 PM | PERMALINK

People worry about $8.00 a gallon gas.This is a joke compared to the reality of peak oil.Every piece of plastic we own comes from oil.Cars,guitars,microwaves,detergents,CD's,other appliances.How much would an appliance or car made completely of steel, wood, and glass cost these days?Fertilizers and pest control products are mainly responsible for our earlier agricultural dominance.Now most farms in the country make grain for animal feed or ethanol(wich,while being a clean fuel uses more energy in production than it makes);our food is mostly grown abroad and shipped.To think our leaders (on either side) will tell the truth, let alone do anything about it is fantasy.

Posted by: vbrans on September 11, 2007 at 6:31 PM | PERMALINK

Imagine if we had sunk $500B into alternative energy research instead of Iraq.

Want regime change in Iran? Lower the price of oil.
Don't like Hugo Chavez? Lower the price of oil.

How do we lower the price of oil? Supply and demand. Use less (lower demand) and the price goes down. Replace oil consumption with alternative fuels - biodiesel, cellulosic ethanol, improved solar for electric cars. etc...

But our good friends the Saudis (home to 15 out of 19 9/11 hijackers) wouldn't like that. The contributors to the Cheney Energy Task Force wouldn't like that.

Posted by: VOR on September 11, 2007 at 6:43 PM | PERMALINK

Just so I understand, Kevin has taken an unsourced throwaway line about non-OPEC countries not being able to meet a spike in demand, which doesn't say anything about why they can't meet demand, to mean that we have now reached the much-dreaded Peak Oil? Is that right? Does this mean it's time to stock up on canned goods and prepare for our imminent Mad Max future?

Posted by: Homer on September 11, 2007 at 7:18 PM | PERMALINK

Does this mean it's time to stock up on canned goods and prepare for our imminent Mad Max future?

No, but it is time to start applying some new thinking. It is time to start taking serious steps toward moving off the oil teat. It is time to start looking at conservation as more than a "personal virtue" and it is time to seriously think about the every-day decisions you make and the ultimate impact of those choices.

It is time to do those things if we want to avoid the day where we have to stock up on canned goods and brace ourselves for the "popaclypse."

Posted by: Blue Girl, Red State (aka G.C.) on September 11, 2007 at 7:24 PM | PERMALINK

Speaking as someone with a chemistry background...Oil is marvelous stuff. I can't believe it's being burned up for fuel!

Posted by: Blue Girl, Red State (aka G.C.) on September 11, 2007 at 7:26 PM | PERMALINK

Creepy.

Posted by: Swan on September 11, 2007 at 8:20 PM | PERMALINK

I've been researching a diary for dkos on peak oil just yesterday.

“The world is consuming more oil than it is producing.”--The Economist, July 14-20 print edition.

The June update on The Oil Drum, the latest I could find, of production numbers shows that all liquids seemed to have peaked in June of 2006 at 85.43 mbpd.

More at http://www.theoildrum.com/tag/update, including a graph (we all love graphs).

Posted by: gmoke on September 11, 2007 at 8:24 PM | PERMALINK

That's why I am driving a Honda Civic Hybrid and working on installing photovoltaic solar collectors on my house - we are going to be in a fuckin' world of hurt in about 5 years, when gas hits $10 a gallon.

Posted by: The Conservative Deflator on September 11, 2007 at 8:46 PM | PERMALINK

PEAK OIL WATCH....Bullshit.

First it was the Saudi's running out of oil - now they will increase production -jeez, I wonder how they plan to do that? I mean, knowing how they are almost played out and all - at least according to Kevin, who know absolutely NOTHING about oil markets.

Iraq is not a member of OPEC yet - but I hear they want to be, and certainly they should want to be a member of OPEC - so they only need to listen to Iran. Iran will show them how to make Western oil contractors take a hike or come up with WAY better, more fair business deals.

Strange too how, before Bush came to power - American oilfields were not even being drill - no local production going on, too expensive - cheaper to buy OPEC oil.

THAT is why there was NO domestic drilling going on in oil rich lands in US, and why is that do you suppose Kevin??? - because OPEC - even as it was price fixing - which is what OPEC does Kevin- was holding steady at 18 - 19 per barrel - too low for profitable domestic drilling here in the US.

IN fact US oil industry was starved for money. MobilEXXON just wasn't making chicken scratch back then, Until Bushie came to power and let the power grid be fixed, then all those rigs started pop up everywhere (the county rig is up from 0) and even in certain states McDonalds has to hire people at $l0.00 an hour.

Again Kevin, there is NO peak oil. It why OPEC is price fixing even now as it opens the spigot, because Walmart and other giant corporation are starting to bitch, and you have the housing market in free fall, they don't want the market to fall completely - remember what happened to big oil that last time there was a big glut on oil on market - oil was 10 dollars a barrel and ExxonMobil doesn't want THAT to happen AGAIN.

It's all a price fixing game and Kevin Drum has NO idea what he is talking about with his comments.

That is why the Marc Rich scandal is such a big deal - because the Clintons didnt use to listen to big Oil nor were they on the campaign contrabution list - but Clinton's have sold out - to the point were there just another coming of George Bush and company.

Posted by: Me_again on September 11, 2007 at 9:01 PM | PERMALINK

Posted by: vbrans: People worry about $8.00 a gallon gas.This is a joke compared to the reality of peak oil.Every piece of plastic we own comes from oil.

People will pay any price; the real problem will be availability, as we saw in '72. Sure we'd pay $20/gal to get to work, but there not be any gas available for some. In '72 it hit petrochemicals hardest as naphtha feedstocks were diverted into making higher profit gasoline, and petrochemicals are used in virtually everything.

Posted by: Luther on September 11, 2007 at 9:06 PM | PERMALINK

Well, skyrocketing oil prices should have an interesting effect on globalization, shouldn't it? What happens to Tom Friedman's flat world when gas is $20 a gallon?

And there's some of us don't think it'd be a bad thing if some of those pesticides disappeared from our food.

Posted by: Delia on September 11, 2007 at 9:24 PM | PERMALINK

We will never run out of oil. God put that oil in the ground for us to drive our cars with, and since we are His chosen people, He would never allow us to fall to the level of those pagan savages who walk and ride bikes, or use *shudder* public transportation.

Posted by: Wacko on September 11, 2007 at 10:15 PM | PERMALINK

There is a misconception about oil going to $8 or $10 or an even higher price. It is as if by raising the price we'll magically increase the supply. This happens to some extent. However, the main reason for increasing the price is to destroy demand by eliminating some buyers. Imagine there was an auction for 80 tanks of gas and there were 100 drivers lined up. How high would the price go? It goes high enough till 20 drivers are priced out of the market.

The other driver is the peak in exported oil. The US produces a lot of oil but we export very little. As the demand for oil increases more and more producers stop exporting and consume all of their production. The result is that the amount of oil on the market falls much faster than overall production.

I don't know if we'll see a Mad Max scenario. However, something unpleasant sure seems to be in the offing.

Posted by: JohnK on September 12, 2007 at 12:25 AM | PERMALINK

If I understand as much about human nature as I think I do, the last gallon of gasoline will be used to drive the turbine engine of a cruise missile carrying a nuclear warhead, aimed probably up a camel's butt.

Posted by: osama_been_forgotten on September 12, 2007 at 12:54 AM | PERMALINK

I don't know if we'll see a Mad Max scenario. However, something unpleasant sure seems to be in the offing.
Posted by: JohnK on September 12, 2007 at 12:25 AM | PERMALINK

Or maybe rather pleasant.

Picture this:
Unable to buy gasoline - osama_been_forgotten boils down his next-door neighbor's obese wife, and renders her into biodiesel fuel in his thermal depolymerization reactor he built in his garage, to power his car to drive to work. Next door neighbor hardly notices, as he's crying that he can't drive his massive Ford F-150 to tow his boat to the lake for the weekend.

Posted by: osama_been_forgotten on September 12, 2007 at 1:26 AM | PERMALINK

Osama, don't forget:
"Soylent Green is people!"

which reminds me that the skies around Beijing look remarkably like the skies in that old movie (1973).

How did we ever let the business as usual people keep up their short term gains while raping the planet and everybody's future?

Posted by: slanted tom on September 12, 2007 at 7:12 AM | PERMALINK

Uhhhh, we're well past peak oil, guys.

Peak oil was the 1990s. We're in a post-peak world now, and need to get our freaking ducks in a row on REDUCING the need for oil, period.

If OPEC wants to make itself useful, it can set up some solar power farms. Sunshine is the other great resource they have in the desert regions. And unlike oil, it is not finite.

If US oil refiners and car manufacturers want to make themselves useful, they'll find another line of business that doesn't put the entire planet in peril.

We're post-peak.

Why is this even news?

Posted by: sara on September 12, 2007 at 10:04 AM | PERMALINK

Peak oil is real, Mr. me-again. I used to think it was all an oil industry scam too, until I did some serious research into it. Ghawar, Cantarell and other giant fields are in decline. What we're left with is finding new small fields and squeezing tar sands.

Posted by: Dinsdale on September 12, 2007 at 10:36 AM | PERMALINK

Conservative Deflator wrote: "That's why I am driving a Honda Civic Hybrid and working on installing photovoltaic solar collectors on my house ..."

Both are very good things to do. The hybrid car, of course, directly reduces your oil consumption simply be getting more miles per gallon of gasoline.

However, the photovoltaic solar collectors are almost certainly not relevant to peak oil, since very little electricity is produced in the USA by oil-fired power plants. Most electricity in the USA is produced by burning coal or natural gas, or from hydropower, nuclear power or wind turbines.

PV electricity is very relevant to global warming since it typically replaces the burning of coal, which is the worst of all fossil fuels in its contribution to CO2 emissions.

PV electricity is also relevant to the impending peak-and-decline of North American natural gas supplies -- which energy experts like Matthew Simmons believe is imminent and will be quite abrupt and rapid -- after which the cost of natural gas will skyrocket when it has to be imported from overseas in liquified form, and the cost of electricity from natural gas fired power plants will also skyrocket.

When pluggable hybrid cars whose batteries can be charged from house current and which can operate as pure electric-drive vehicles (burning no gasoline) for 60-100 miles per charge are available, then clean renewable electricity from rooftop PV or commercial wind turbines will be able to directly replace the burning of gasoline for transport. Hopefully that will happen soon.

Posted by: SecularAnimist on September 12, 2007 at 11:30 AM | PERMALINK

"People will pay any price"
There speaks an American. For most of the world, price is an inelastic reality. But Americans just "gotta have it" and it would be a crime against nature (and death to politicians) for us to face reality.
I've reflected lately that even defeat in war is different for America. In Vietnam and now in Iraq, those wars went on long after any other (moderately sized) nation would have been forced to throw in the towel....because we had a wealth of resource we could throw at the problem.
Mind you, it didn't/doesn't change reality, it just postpones reckoning

Posted by: Stewart Dean on September 12, 2007 at 11:42 AM | PERMALINK
What about the oil under the Arctic... Gore/Edwards 08 at 6:02 PM
Russia has claimed it already. You snooze, you lose.
...but Clinton's have sold out .... Me_again at 9:01 PM
Check the numbers. Despite deregulation and decontrol, US oil production peaked in the 70s. Posted by: Mike on September 12, 2007 at 1:04 PM | PERMALINK

of course that fact has absolutely nothing to do with the reason we're in Iraq. Nothing here to see folks, move along!

Posted by: scott on September 12, 2007 at 1:10 PM | PERMALINK

When pluggable hybrid cars whose batteries can be charged from house current and which can operate as pure electric-drive vehicles (burning no gasoline) for 60-100 miles per charge are available, then clean renewable electricity from rooftop PV or commercial wind turbines will be able to directly replace the burning of gasoline for transport. Hopefully that will happen soon.

What the hell are you doing? Didn't you hear? You're not allowed to be reasonable, realistic and even optimistic in discussing the future relative to peak oil and alternative energy! You didn't even say anything about Phoenix becoming a ghost town and Asian pirates raiding the West Coast! Get with the program!

Posted by: C.L. on September 12, 2007 at 1:56 PM | PERMALINK

I see Halloween came early this year.

My own personal solution is to find entertaining ways to hasten the aging process.

Posted by: Hieronymus Braintree on September 12, 2007 at 3:24 PM | PERMALINK

We already are past the global peak of conventional crude oil. It occurred in May 2005.

Send me an email and I will send you the link at the US government EIA website.

Posted by: JRip on September 12, 2007 at 5:54 PM | PERMALINK

The guys at thoildrum.com have shown, more specifically, that

1. Saudi production has declined each year since 2004
2. That Saudi Arabia's fabled North Ghawar oilfield -- its most prolific -- is largely drained.

Does this prove for sure that Saudi Arabia has peaked? No, but it sure casts doubt on the wisdom of relying on them for supply into the indefinite future.

It might also be, as Saudi sources alleged in an NYT article of August 2005, that the Saudis could lift an extra couple of million barrels a day on a short term basis, but not a sustainable one.

Posted by: Sunlight on September 12, 2007 at 11:06 PM | PERMALINK

Saudi Arabia's ability, and OPEC's in general, to function as a swing producer as they did in the past is very much in doubt. This is why events that wouldn't have caused too much worry several years ago, like a hurricane heading towards Mexico or Nigerian rebels hijacking an oil derrick, loom so large these days.

In the past OPEC could just 'open the spigot', as GWB likes to say, plug any supply gaps that appeared, and keep the market steady. OPEC can't fill the gap anymore. So, when a facility in Nigeria goes down, supply goes down. Period.

Posted by: Joe Bob on September 13, 2007 at 12:52 PM | PERMALINK




 

 

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