Aug 102009
 

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“World oil supplies will pass their peak production sooner than expected, creating conditions for a global energy catastrophe… Higher crude prices brought on by sharply growing demand, coupled with stagnation or decline in supply, could shove any recovery off-course.” Fatih Birol, chief economist at the International Energy Agency. Aug. 3, 2009

According to Birol, “the public and many governments are ignoring reports that oil is The sun is setting on the world's resources.running out faster than predicted. Birol said global production likely will peak in about a decade, 10 years sooner than most governments have estimated.

“In an assessment of more than 800 oil fields in the world, Birol found most of the biggest fields already have peaked, and the rate of decline in oil production is running at nearly twice the pace calculated just two years ago.”

‘In addition, chronic under-investment by oil -producing countries likely will result in an oil ‘crunch’ within the next five years, jeopardizing hope  of a recovery from the global economic recession…”

(The old fields that are cheaper and easier to extract oil from, according to data, are considered by a number of experts to have reached their peak and are now entering their declining phase.)

This soon-to-be shortage is a result of oil companies who have abandoned efforts to drill for new oil sources due to the current surplus of oil on the market, which has forced prices lower. If the world economy improves rapidly over the next three years, there won’t be enough oil to meet the demand and prices will rise dramatically.

A more specific forecast is from L. Farrell Crane from Energy Opportunities Capital Management:

“…it is not difficult to predict what will happen to supply when spending (on infrastructure and new drilling) is held constant or, worse yet, reduced. We expect that we are going to see some supply problems manifest themselves beginning in 2010 and more considerably so by 2011 and 2012. Obviously the specific timing of a supply crunch will depend on the extent to which we see an economic recovery or continued slowdown. Clearly any increase in global activity and a related increase in energy demand will only accelerate the timing and exacerbate the issue.” The Wall Street Transcript, 08/03/2009

Charles T. Maxwell, senior energy analyst at Weeden & Co., is known as the “dean of energy analysts”. In February of 2008, he made predictions on a nightmare “barreling toward America and the world”. His prediction was based on the fact that world oil supply had fallen behind demand at that time.

But the debacle on Wall Street in the fall of 2008 caused an economic collapse world wide, resulting in a downturn in oil consumption. When the economy picks up, the same scenario will be in place as demand for oil surges with the economy.

Maxwell’s interview with energytechstocks.com in early February of 2008 is sobering. Some points:

  • There is only about 1.2% more oil available each year, not enough to keep up with 1.5% annual growth.
  • Between now and 2010, this supply shortfall will be made up through a drawdown in inventories, helped out by a slowdown in demand in 2008 and 2009 due to a recession or near-recession in the U.S.
  • In 2010, the shortfall will become greater than can be made up by what’s still in inventory, thus beginning a period of global scarcity that will lead to a “peak” in conventional oil production in 2012 or 2013. [1]
  • It gets even worse in 2015, which is when he expects a peak in the production of all liquids, a category that includes condensates, tar sands oil and biodiesel.
  • By 2025, “We can create some answers.” He explained that both plug-in electric vehicles and cellulosic biofuel are “wonderful ideas”; however, given that it takes 10 to 15 years or longer to turn over the world’s vehicular fleet, such technological breakthroughs won’t happen quickly enough to prevent the nightmare from happening. See part 1.

Maxwell also said to expect $12 to $15 per gallon gasoline “in a few years” with oil at $180 a barrel in 2015 and $300 a barrel in 2020. See part 2.

One factor that no one in government, the media or experts have mentioned is the population explosion in the United States over  the next four decades. The U.S. Census Bureau has predicted a population of nearly 100 million will be added to America’s population by 2039 or sooner, by some estimates.

These 100 million will, for the most part, be illegal and legal immigrants who speak Spanish. Another source of new people living in America will be from a high birth rate among this group. This amounts to over 3 million added to our population every year. Since the unemployment situation will not improve for a long time, if ever, a number of these new workers will likely be on welfare. They will also be using large amounts of our resources, such as water, food, oil and the thousands of products made from oil.

Since we are about to enter an extended period of diminishing oil supply, how will 100 million more people help us conserve oil?

In the 2005 book, “The Long Emergency” by James Howard Kunstler, everything will This outrageous scene, abandoned homes, autos and growing your own food, is happening in America now.change as oil and other resources become scarce. “Globalism will wither. Life will become profoundly and intensely local. The consumer economy will be a strange memory. Suburbia,-considered a birthright and a reality by millions of Americans-will become untenable. We will struggle to feed ourselves (no more contaminated food from China). We may exhaust and bankrupt ourselves in the effort to prop up the unsustainable. And finally, the United States may not hold together as a nation.”

There are a number of factors coming together to cause this “perfect storm” for America and the world. The trigger, the corporate and financial interests, aided by the leaders of government, have, through trade agreements, essentially taken control of the world and used it to obtain enormous wealth at the expense of workers and the environment. And in their never ending quest to continue to “grow their business” in a finite world with finite resources, they are destoying it.

[1] Since the unexpected economic collapse in late 2008 was not figured in Maxwell’s forecast, the timing and speed of a recovery could change the beginning of a supply scarcity.