The US Energy Information Administration’s January oil production figures are out, and they show record oil production. Where are we headed from here?
Figure 1. World "Liquids" Production through January 2011, based on Energy Information Administration data.
While production for January is up a bit (219,000 barrels compared to December), the monthly numbers bounce around a fair amount because of planned maintenance. They are also subject to revision. Figure 2 seems to indicate that the production amounts are trending upward a bit, probably in response to the recent higher prices.
Figure 2. Monthly average Brent Oil price and total "liquids" produced, both from US Energy Information Administration.
The amounts in Figures 1 and 2 are not entirely up to date, since they are only through January 31, 2011. All of the disruption in the Middle East started at the very end of January, and the disruption in Libya’s supplies did not start until February. The earthquake in Japan took place March 11. OPEC estimates that OPEC and world oil supply fell in both February and March, with Libya’s production falling by 1.2 million barrels a day between January and March, with only small supply increases elsewhere offsetting this. World oil prices continue to be high. At this writing, West Texas Intermediate is about $111.50 a barrel; Brent is about $122.
So what do we expect going forward?
Eventual Decline, but not Following a Hubbert Curve
It seems to me that the story about what happens in the future with oil supply is much more complex than what depletion and new supply alone would suggest. As I explained in a previous post (Our Finite World version and Oil Drum version), the actual downslope is likely to be steeper than what a Hubbert Curve would suggest, because economies of many importing countries are likely to be adversely affected by rising oil prices, and because demand (and tax collections) are likely to be low in countries that lose jobs to countries that use oil more sparingly.
Hubbert assumed that nuclear or some other cheap alternative form of energy would allow business to go on pretty much as usual without oil. We know now that we are close to the downslope, but no inexpensive alternative has been developed in quantity. Because of this, actual production is likely to be less than the amount that is theoretically possible. This happens because of indirect impacts of inadequate oil supply, such as recession when prices oil prices rise; riots when food is in short supply; and inadequate demand for oil because of jobs move overseas to countries using less oil, leaving many unemployed.
In some sense, if oil prices could rise indefinitely, we would never have a peak oil problem. The high prices would either stimulate production of alternative types of energy or would enable oil production in areas where oil is very costly to extract. The indirect impacts mentioned above prevent oil prices from rising indefinitely. These indirect impacts seem to be related to inadequate net energy for society as a whole. Theoretically, if oil prices could rise indefinitely, we could even end up using more energy to extract a barrel of oil than really is in the barrel of oil in the first place–something that is hardly possible. The fact that rising oil prices lead to impacts that tend to cut back demand seems to be a way of keeping prices in line with the energy the oil actually provides.
Which countries are able to buy the oil that is produced?
If we look at oil consumption by area, we find the following:
Figure 3. Oil consumption by area, based on EIA data.
It is clear from Figure 3 that consumption of my grouping called “Europe, US, Japan, and Australia) is much flatter (and recently declining) than that of the “Remainder.” The Remainder includes oil exporting nations, plus China and India and other “lesser developed” countries, many of which are growing more rapidly than countries like Europe, US, Japan, and Australia.
I have plotted the same data shown in Figure 3 as a line graph in Figure 4. The latter figure shows even more clearly how different the oil use growth rates have been.
Figure 4. Data from Figure 3, graphed as a line graph, instead of a stacked area chart.
If world oil supply is close to flat (shown in Figures 1, 2, and 3), Figure 4 shows that we have a potential for a real conflict going forward. The “Remainder” countries in Figure 4 will want to continue to increase their oil usage in future years, even if oil supply remains flat. This is likely to lead to considerable competition for available oil and high prices, such as we are seeing now. About the only way the “Remainder” countries can increase their oil usage is if oil usage by the “Europe, US, Japan, and Australia” group declines.
The most common way that oil usage (consumption) can be expected to decline is if high oil prices induce a recession. The countries that seem to be most susceptible to recession are countries that are (1) oil importers and (2) are heavy users of oil, since an increase in oil price has the most adverse impact on the financial health of these countries. When recession is induced, there are layoffs. These layoffs reduce oil usage in two ways: (1) less oil is used for making and transporting products that these workers would have made, and (2) the laid off workers are less able to afford products using oil, so reduce their purchase of oil products.
Because of this relationship, competition for oil is likely to be very closely related to competition for jobs in the future. The countries that get the jobs can be expected to get a disproportionate share of oil that is available.
Figure 5. Per Capita Energy Consumption, based on EIA data.
If we look at per capita oil consumption (Figure 5) on a world basis, it has been close to flat since 1985, because oil production until very recently rose enough that oil growth more or less corresponded to population growth. China and India’s per capita oil consumption rose, meaning that the oil consumption of someone somewhere, such as the Former Soviet Union, needed to decline.
Future Oil Supply
If we look at historical oil production (Figure 6), it has been fairly “bumpy”:
Figure 6. World oil production for crude, condensate and natural gas liquids. 1965-2009 from BP; 2010 from EIA.
By fitting trend lines, we can see where oil production seems to be headed:
Figure 7. World oil production from Figure 6, with fitted exponential growth trend lines.
What we can see from Figure 7 is that the growth rate of world oil supply has gradually been slowing. The growth rate was highest in the 1965 to 1973 period, at 7.9% per year. Then we hit the “oops” period of 1973 to 1975, when we ran into conflict with OPEC regarding oil supplies. The trend rate dropped to 3.9% in the 1975 to 1979 period. Between 1979 and 1983, oil consumption dropped to a -3.9% per year, when we picked some of the low hanging fruit regarding oil usage (mostly by eliminating petroleum from electricity generation and downsizing automobiles). The trend between 1983 and 2004 shifted to +1.5% per year, and since 2004, seems to be about +0.2%.
There are so many countries involved, that it is not easy to identify one country or area that is rising, but one country of note is Iraq. Its production in January, 2011, seems to be up by 300,000 barrels per day, relative to mid-2010, based on the latest data. Thus Iraq seems, for now, to be helping to keep world oil production flat, or even growing by a bit, despite increasing depletion elsewhere.
Looking at Figure 7, it looks like the “trend” in trend rates over time is down. In the absence of other information, we would expect production to remain at its recent trend rate of 0.2%, or alternatively, the trend rate could take another step downward, probably to an absolute decline in oil production. A recent announcement from Saudi Arabia suggests that its ability to offset declines elsewhere in the future is likely to be virtually nil, so a continued decline in production from the North Sea and elsewhere will need to be made up with new production elsewhere, or will lead to a worldwide decline in oil production.
World population has been growing. If oil production remains flat or declines, and world population grows, this means that someone has to be a loser, in terms of per capita consumption. I am not certain how this will turn out, but I see at least three forces that may come into play:
1. Countries may figure out that permitting jobs to move to less developed countries is not in their best interests, and start increasing protectionism. This will tend to keep demand more level (higher for importers, and lower for growing economies). The overall impact on oil demand is less clear–less oil will be needed for long-distance transport, but more oil will be needed to maintain current lifestyles of workers.
2. Countries that are in financial difficulty may find themselves increasingly shunned, as they seek to “restructure” their debt, and may find themselves increasingly cut off from buying oil products and the goods that that are made using oil products. This will tend to reduce aggregate world demand for oil, by reducing consumption in specific countries that have financial difficulty.
3. There may be recession affecting a number of countries, reducing their demand for oil.
Figure 8. Historical crude, condensate, and NGL production based on BP and EIA data, plus a Guesstimate of Future Oil Supply.
It seems to me that as we go forward, we are likely to see a jagged pattern of oil production decline, reflecting a combination of less demand for high-priced oil as oil supplies continue to be very tight, except at high prices. In addition, some countries can be expected to increasingly drop out of competition for oil, as their financial situations deteriorate. Thus, the pattern for decline in oil consumption can be expected to vary significantly from country to country, depending on their policies and their financial conditions.
Clues as to Which Countries May Drop Out First
If we look at the per-capita consumption of the PIIGS countries, we see that for the most part, these were countries that increased their consumption of oil, and then were not able to maintain the increase.
Figure 9. Per capita oil consumption of PIIGS countries, based on EIA data.
The difference is quite striking when we compare per-capita oil consumption to a few of the non-PIIGS European countries.
Figure 10. Per capita oil consumption of selected European "non-PIIGS," based on EIA data.
Why is there such a different pattern between the PIIGS and the non-PIIGS? I haven’t researched the situation extensively, but it would seem as though the PIIGS countries tended to be agricultural countries that tried to develop more diversified (oil intensive) economies. They expanded and incurred a lot of debt, and now this debt is becoming difficult to pay back. As far as I can see, this economic growth was not based on the growth of stable, fairly cheap supply of electricity, such as hydro-electric or coal. Instead, growth depended fairly heavily on oil use, and the cost of oil rose. It may be that part of this growth in oil use occurred because of an improvement in standard of living–more cars, more vacations, bigger homes.
My working hypothesis is that when oil prices went up, the economies of the PIIGS countries had too much debt for the new industries to provide enough revenue to service both the higher costs of oil and the debt costs. Countries which didn’t try to grow in this way didn’t have as much difficulty, although high oil prices are still a burden for them. They may eventually run into debt problems, just a little later.
What are China and India and some of the other countries that are growing rapidly doing differently, that their economies haven’t collapsed? One thing they have going for them is the fact that their oil usage is at a vastly lower level, even after rapid growth. Another thing that they often have going for them is growing electricity production, using an energy source that is relatively cheap. In the case of China and India, this is mostly coal; in the case of some of the other lesser developed countries, it is hydro-electric.
It seems as though at some price, each country will hit recessionary pressures and drop back in its demand for oil. This price will vary by country, depending on the country’s current debt situation, the extent to which the country can continue to “grow” its economy based on a growing source of cheap electricity, and how well international trade holds up with increased protectionism and higher oil prices. Countries depending on growing hydroelectric and coal-fired electricity are likely to hit limits, too, as these supplies reach natural limits.
One situation which may affect how long oil prices can stay high for the United States is the existence of QE2, or “Quantitative Easing 2.” This seems to keep the dollar low relative to other currencies, thus allowing commodities prices to remain high. QE2 is scheduled to end June 30, or earlier. If it is allowed to expire, it would seem as though interest rates could rise materially (because QE2 also keeps interest rates low), and could lead to a rapid deterioration in the financial condition of the United States. If this should happen, it would seem as though the United States could be one of the countries that enters recession and significantly decreases its demand for oil. Of course, high oil price by itself may lead to this outcome quite soon, also.
We cannot know how all of these forces will play out. Generally, I would expect that there will continue to be an upward push on the price for oil because of rising extraction costs, and because unrest in the Middle East is causing countries to provide additional benefits for their citizens, further raising their costs (estimated to be $95 barrel by the Wall Street Journal). As long as the world economy is expanding, rising demand will also tend to pull oil prices upward, because many countries are trying to compete for a supply of oil that is barely growing.
The various countries around the world can be expected to be in differing positions with respect to their ability to pay high oil prices. Gradually (or not so gradually), the weakest ones will be pushed away from buying oil, either because of debt defaults and shunning by exporters (unless they have goods to trade in return), or because of recession, or both. World oil production seems likely to decline as the number of countries that can afford to continue to purchase high-priced oil declines. Ultimately, oil consumption can be expected to drop to close to 0, because no country will be able to afford to buy very much oil at a high price, and because oil companies will not be able to maintain necessary infrastructure for a very limited supply of oil.
I don’t think that we can expect an analysis of the theoretical capacity of future world oil production to tell very much of the peak oil story. We really don’t know how much of the oil which seems to be available will actually be produced. A lot of the story will depend on the ability of individual countries to keep their economies in good enough shape that they can afford to buy high-priced oil. Many residents of countries that are shut out from oil supply are likely to find that oil products are not available at any price.
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Regarding population data by country, perhaps this might be of use.
http://www.gapminder.org/
Whatever, it has fascinating interactive balloon graphs which offer all sorts of interesting combinations of stats, ‘playable’ over extended time periods.
Hi Gail,
I’m a part of Yale Environment 360, a magazine produced in association with Yale School for Forestry and Environmental Studies, and because you’re so well-informed about the oil issue, we’d love to get your perspective on an article recently written for us by law professor Michael Graetz. He takes a look at the promises past presidents have made involving US energy policy:
http://e360.yale.edu/feature/energy_deja_vu_obama_must_break_with_failed_us_policies/2395/
Let us know what you think! Your blog is incredible!
I’ll take a look and get back to you. I don’t have time right now, but I’ll try to do it later.
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It is time to declare the year of the Jubilee and cancel/repudiate all debt. This is a problem for the issuers but not for the debtors. Of course the two big issuers were all the Americans who paid social security and medicare and medicaid tax. Oh well (age 52).
I would love to see the EIA or its anagram produce a graph called “World Oil Production, Minus Energy (in Oil Equivalent Terms) Used to Create That Production”. Long title, meaningful graph, likely to cause panic, will never happen. Actually, I guess they could just call that graph “Net Energy from Crude Oil”. Has the EIA or IEA ever used the terms “Net Energy” or “EROEI”?
Thanks, Dave. I wasn’t questionning what Gail said. I’m just trying to understand what the longer term trend looks like.
Gail,
During the timeframe of Figure 1, 2001-2011, world population grew by about 800 million. Since total liquids grew very little during that decade, it is clear that if the graph were redone to show total liquids per capita, all of those nearly flat or slowly rising lines would be steadily dropping instead.
Actually, there was a fair amount of growth in total liquids in the early part of the 2001 and 2011 period. Using the population and consumption figures (which relate to total liquids) provided by the EIA, the number of barrels per capita for the world was as follows
2001 – 4.59
2006 – 4.75
2010 – 4.54
It is only in the period since 2006 that population growth outstrips the increase in world oil supply.
I think that All Liquids is misleading statistic to look at in understanding where we are in the Peak Oil time line.
The reason being is that a number of the liquids included, are created by consuming other fuels. And those other fuels are still counted in the stats. So fuels that never get leave the petroleum industry to perform useful work, are still counted in the production profile.
If we counted money the same way….
Say I earn a dollar and invest that dollar in a venture. Then that venture later repays me a $1.50. I now have a $1.50 The original dollar is not counted, because it was an investment. $1.50 is now considered to be my total production. This is how we count profits and losses in finance.
But if we’re doing a all liquids style of accounting, then I would say that I have produced $2.50. Because you add all of the monies together, including the monies I had to invest. Costs are ignored and profits get added together, as net production in this system. I earned $1.00. then I earned $1.50. So I’ve earned $2.50.
This accounting sham creates the illusion that energy production is increasing, when it is quite probably in decline.
You may have figured out why the EIA is doing it. I am sure it is not to give a clearer picture of what is going on.
Thanks, Gail. I was doing a bit of guessing and am glad to see actual figures. Going forward things look very different. Population growth continues at a rate of more than 80 million people per year, so unless we see significant growth in oil production it looks like further declines per capita will be hard to avoid.
I once read that per capita oil production reached a maximum in 1979 but I guess that must be false. Does the EIA per capita data go back very far?
Gary: The per capita oil production in 1979 was more than 5 barrels per person per year.
I think Gail may have meant: “For the 2001 to 2011 time period, it is only in the period since 2006 that population growth outstrips the increase in world oil supply.”.
I was using EIA data because it had population data associated with it in the same format. Unfortunately, it doesn’t go back very far. BP consumption data goes back farther, but uses slightly broader groupings of countries. It doesn’t give population data to go with the amounts, so a person has to find them from some other source.
I agree that going forward, per capita consumption is going down, more for some countries than others.
The EIA, in previous reports along with the USGS has stated that they forecast demand, in order to forecast production. It could be that they are seeing higher prices as an indication of higher demand, and assuming a subsequent rise in production.
The rising prices in the face of rising supply, doesn’t sound right to me. The EIA has published overly unrealistic short term numbers many times in the past, only to revise them dramatically downwards, months later. While publishing their false but optimistic numbers, they got quite a bit of press, and media pundits used that false data to prove that there is no supply problem. Because the corrections came months later and were not well reported in the media, the public’s memory is that higher fuel prices came while supply was rising, proving that the scapegoats caused the higher prices and the the supply / demand relationships don’t apply to oil.
It’s my opinion that we’re seeing another con job from the EIA. The numbers seem to good to be true in the face of continued price increases.
I’ve decided Hubbert was an optimist.
Oil demand is elastic after all, higher price simply means fewer jobs but since we’ll never admit to peak oil, we’ll never address it as the root problem. I was interested to see the $95bbl figure for OPEC’s pacification of it’s citizens, I’d never thought of ELM in quite that way.
KSA made ELM a part of their “policy” a couple days ago when they said their production would stay flat till ’15 and grow to average 10.8mb/d by 2030, but:
“a larger proportion of production will be directed gradually toward meeting domestic demand, which is rising at a higher rate than expected average output growth”
http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/8812036
I probably should add some reference to the Saudi statement to the post.
One is irresponsible if one does not take the next step in thought about these Saudi plans.
It is, simply, they will not be permitted to emphasize their own populace.
All sorts of ways to build up one’s pretext for invasion. Food import blockade. Spare parts blockade. Technology blockade. All of which will be done to deny evil factions within KSA the raw materials they are using to build weapons that are then used elsewhere.
At some point, the blockading forces will be attacked. Presto, pretext.
Qatar, Kuwait, Dubai and Saudi Arabia all have significant influence on US policy. Much of what we do in the ME, such as our military actions in Iraq, Iran,. Yemen and Syria are dictated by the Royals in these countries. These countries have received the lion’s share of no bid contracts for work in Iraq.
They are not only our staunchest of allies, but because of their great wealth, contribute a great deal to the campaigns of our congressmen and senators. Their role in setting US economic and foreign policy shouldn’t be underestimated. Now that foreign corporations are allowed to participate in the political process in Washington DC under the new rulings that make bribery a form of free speech, their influence has expanded greatly.
You won’t see a blockade in KSA unless the citizenry revolt, and we’ve gotten the Royals out safely.
Come now. You don’t think loyalty to the royals drives perspective more than the oil supply? And why would the royals be at risk if they decided to keep all the oil domestic, to provide subsidized supply to the populace?
Now you can make a case that with fewer exports, they don’t have the money to bribe the populace. But oil itself in the form of nearly free gasoline is a bribe.
Follow the logic. The Saudis will not be allowed to emphasize their populace with their oil. Blockade is just one way to force them to export.
As for campaign contribs, if you’ll look more closely at my comment, I didn’t say it was America that would force the exports.
I thought the Perspective you were taking is that the USA would go after KSA to benefit the USA.
KSA is headed towards a disaster. I agree with you on that.
I’ll have to think on the idea of blockades to force exports. Some form of internal demand destruction will be necessary.
One possibility is if the KSA could be locked into a war then oil and gas rationing would be better accepted by the public there.
I’d like to make these points:
The middle east is water stressed, from climate, growing wheat, using non renewable aquifiers and desalination activities. Its essentially an inhospitable environment for large groups of humans, being made more so. The key is getting salt out of water, then there is no problem with supply, so why not use a bigger version of gypsy wells that use the ground to filter salt, etc? anyone tried it?
Need a fuel alternative? Industrial hemp????
Need food? Oyster Mushrooms??? you need old paper and a tent to grow them in the desert.
The problem with energy is that humans are still operating on a chimp hierarchy system of authority, meaning the ability to do ANYTHING significant is concentrated in the hands of the few that control resources. Its clear that billions of people cannot be ‘governed’ by a small percentage of that amount. People need to be fully aware of how to live with nature, so the basics such as water and food can betaken care of at the ground level, not by these monoliths that are clearly struggling to cope.
As I understand it, gypsy wells are for finding springs near the surface. If there is a general lack of water, I cannot imagine that this will be helpful on a large scale.
Industrial hemp has a similar problem–scale needed for solution. Oyster mushrooms hardly make up more than a small faction of a person’s diet.
If we had a small problem, small things like this could make a dent. Our problem is that we have a huge problem.
Gail
Interesting graphs. Your addition of trend lines was particularly useful for me.
Regarding Europe, PIIGS and your comment that these were agricultural countries trying to modernise, the same could be said of France post WWII, but that country is so much larger and has a lot of good agricultural land for its population and agricultural crop yields more than doubled in any case in modern times. (This was a case where ‘oil’ and petrochemicals generally, provided large leverage in productivity and value derived from land and agricultural work). I am not sure I would include larger Italy either with other PIIGS, but one obvious common characteristic for Greece and Portugal and to a lesser extent Spain, is the extent they relied on the phenomenal growth in mass tourism since 1970, and though the German motorist first led the way, tourism has meant mass air travel. The vulnerability of the air travel industries seems to have been demonstrated across OECD in the recent collapse of ‘financial over extension’? Investments that were ‘all the rage’ just 4 years ago, based on previous money-making trends in property and tourism and travel, have partially collapsed in value.
phil
Post WWII, France also had low oil prices when it diversified. It invested in nuclear electricity, when oil prices were low, providing long term source of electricity with relatively little investment requirement later on.
Looking at my PIIGS graph, Italy really doesn’t belong in with the rest of the group. It does not show nearly the growth of the others. It may also be a bit farther from default than the others. I noticed when I was putting together graphs of this type that Japan showed a run-up of per capita oil use in the 1985 – 1996 period. I don’t know whether this had any bearing on its later decline.
Tourism isn’t really a sustainable long-term growth strategy, in a time of falling oil supply. Atlanta has had some of the same issues, not with tourism, but with conventions, often for business purposes. These too get cut back, as costs rise.
Thanks Gail for reply and for your further thoughts.
Greece, Portugal and Spain were dictatorships and they came late to the table of EU expansion. Timing seems to have made a difference, and in those countries investment, particularly that from the northern ‘core’ countries, appears to have gone proportionally more to the easy stuff – for example, property related to sunshine holidays .
When the oil shocks of the 1970s and early 80s were replaced by the ‘good times rolling’ across the EU, there was enough oil and energy for enhanced globalization, and the there was a supposed banishing of previous scarcities. One could say that although there was never a return to the pre-1970 trend in oil consumption, the more uses ‘oil’ and NG that could be foound, then the ‘better’ it was for the self-stoking furnace of the modernized economies.
Only recently, it seems, has reality bitten back. Those countries like France (nuclear electricity) and Denmark (district heating with electricity from imported coal, and more recently wind energy) who responded to the earlier oil shocks, are probably now in a more fortunate position. (France conceived its nuclear plan in 1973 because of the shock of raised oil prices and built 56 reactors in the next 15 years to 1988, although the ‘constant-dollar’ price of oil did not drop until 1984.) The rest of us in EU will need that remaining North Sea and increasingly Russian natural gas. In the UK we now have very little coal production and must import most of our coal for 35 -40% of our electricity generation.
I agree with you that tourism is not sustainable, but seems to have rebounded somewhat this year. I read that 2.5M of us will leave Britain for a holiday this Easter week!
phil
I will be visiting Spain myself for the second time in less than a year for a Peak Oil Conference May 5, 6, 7.
Hi Gail,
I’ve been reading your articles for a while and I concur with your analysis/prognosis. In my own searching for the truth of this I’ve written “Energy Balance” http://ergobalance.blogspot.com and it seems more than likely that the ride down the Hubbert peak will not mirror its ascent. There are issues of the Saudi production having changed the geology of their wells so that less oil will be recovered than thought, in addition to the vexed matter of how much oil they really have. The EROEI is critical of course, and indeed of the 1.2 trillion barrels of conventional oil the world allegedly has, it is a matter of debate how much will be recovered in fact and at what cost. It is interesting that (I live in the UK) the price of diesel is rising but far outstripping the rising price of petrol here. I would have expected, in the light of the lack of Libyan light crude poil that the reverse would have happened? Presumably there is also a decline in heavy oil production from the Middle east, which is more readily refined into diesel fuel whereas the light sweet oil is best converted to petrol? I would be interested in your thoughts on all of this. Regards, Chris
I expect the rising cost of diesel relative to petrol reflects an imbalance in the demand for finished products, more than it does a change to the type of products being made, since refineries seem to be set up for a particular mix, and don’t stray all that far from it over the short term.
If industrial demand is relatively high, this would tend to push the demand for diesel up, since it is used in many industrial application.
I checked EIA’s latest This Week in Petroleum, but it doesn’t show the pattern I indicated that could cause the problem. So maybe the best answer is, “I don’t know.”
Some people claim that the US government has done nothing to address peak oil. Your observation that Iraq is the only country that has significantly increased production proves that this is not true. Given that US citizens refuse to conserve, and given that the cost per btu of renewables will always be significantly higher than oil (because it takes oil to make lower density renewables), the only viable solution is to secure whatever oil remains by force which the US did with Iraq. Not only does the US government get it, they have implemented the only viable strategy.
I don’t agree. A 3 Trillion dollar war to “secure” Iraq’s oil is not value for money. That oil could have been purchased for far less money on the open commercial market. A good portion of that $3 trillion could have been used to reduce the US deficit and fund public works (including renewable energy) domestically.
The major cause of the US’s problems is precisely its strategic overstretch and military overspend. The US has huge blind spots about its own failings and poor policy. Is China having any more problems getting rescources than the US? No. And it’s getting them without deploying armies over half the world. China is being a darn sight smarter than the US is at the moment. This is not to say that China won’t run into problems of its own soon. It will. It has big internal pressures and rifts building up.
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I don’t agree. A 3 Trillion dollar war to “secure” Iraq’s oil is not value for money. That oil could have been purchased for far less money on the open commercial market. A good portion of that $3 trillion could have been used to reduce the US deficit and fund public works (including renewable energy) domestically.
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Iraq oil was sequestered by sanctions enacted to address Hussein’s behavior. So it could not have been purchased on the open market, unless you wanted sanctions lifted and his gassing of the Kurdish populace approved.
This hatred of Tony Blair clouds thinking.
Our government approved of the gassing of the Kurds at the time. Donald Rumsfield assisted in an advisory role.
The Kurds were fighting Saddam on behalf of Iraq. The US was suing Iraq as a buffer against Iran, and doing everything possible to keep the war going without letting Iraq win.
The USA flip flops in who’s a Golden Boy and Who’s the Evil Villain. Saddam used to be the Golden boy and Treated well by the media. Then the media taught us that he was evil. What will the media teach us tomorrow?
As Ikonoclast argues, we spent $3 trillion to destroy Iraq’s oil production, then build it back up. Actually, we’ve spent far more than that to destroy Iraq’s production, if we go back to Bush I.
The net effect is that we spent a lot of money to reduce the quantity of oil going to the market over these years.
This boosted profits for other OPEC nations. so you could say that we invested huge quantities of money to boost OPEC’s profits moderately.
It’s myth that the US benefits directly from Iraq’s Oil production. We pay $billions / year to cover Halliburton’s expenses to pump the oil. Then Halliburton puts all of their tax free profits in ME banks. The oil from Iraq never makes it to the USA, and the USA pays a lot for it, but gains no profits from it. Essentially, that money is boosting the economy of the ME, while providing no benefits for the USA.
The reason we do this is because the ME spends a lot of money lobbying our politicians, through various international corporations. Our politicians see this as free speech money, and it allows foreigners to outbid American voters.
This is one reason we’re cutting domestic programs. Foreign corporations want more subsidies from the US in the form of no bid contracts and the like. Our politicians are looking for ways to free up money to ship overseas. so far the marketing campaign to get the US citizenry on board with this is working well. We have a ground swell movement (led by the media) screaming to eliminate public school funding, Social Security, Medicare and Medicaid. When cut, these programs will free up much more money to send to the ME, to boost their economy and help through these difficult financial times.
This is certainly a response to Peak Oil. But it’s not driven in the interest of the USA. The nations that can buy the most votes from our politicians, stand to benefit the most.
I agree 100%. The federal government is the world government and it is bought by the highest bidder. It has interest in protecting or serving the citizens of America.
oops that should read “has no interest”
As far as America goes until people car pool with two in a car, until people double up two generation in a house I will not worry about declining energy (oil, gas, coal and nuclear) in the US.
Mexico on the other hand is get fast to zero energy and the social unrest will show up as mass immigration to the US.
For Egypt if they can build out lots of CSP (concentrating solar power) fast they have a chance. If not with there 2% population growth rate they will be poor peasants. The same for China.
The problems for the US are basically financial. As long as these can be papered-over, the US should do all right. These are very serious problems, and cannot be fixed at all easily (or maybe “at all, period”). This is why I am much more pessimistic about the US’ long term prospects. QE2 is doing a pretty good job of papering over the problems, but once it goes, we are stuck.
Gail, you do this reporting so well. This is excellent
The price & production model you have researched is one aspect of future oil supplies. However, the Export Land Model & the amount of oil available for export will be a major determining factor in how importing countries (basically your Europe, USA & Australia group) fare in the months ahead.
Serious serious problems ahead.
Maybe I should have mentioned Exportland specifically. It is pretty closely related to the relationship I show in Figure 4, except that combines the demand of oil exporters and growing economies like China and India. Our ability to get oil imports will go downhill quickly, either way,
I see the ELM is also discussed further down this thread.
I think it would be a great post from you at some stage.
Matt has just published an ELM appraisal wrt Australia’s imports at Crude Oil Peak http://www.crudeoilpeak.com/
that you might be interested in.
Cheers