Monday, May 14, 2007

The Growing Signs of Energy Trouble

While high-priced media pundits focus on nonstories like the price of John Edwards' hair cut, there are troubling signs that we cannot keep putting off dealing with energy. I want to start with a post over at The Oil Drum by regular contributor Stuart Staniford who has been analyzing whether Saudi Arabia's recent cutbacks in production are voluntary or a result of oil depletion:
...Saudi oil production has been falling with increasing speeed since summer 2005, and overall, since mid 2004, about 2 million barrels of oil per day in production has gone missing (about 1mbpd in reduction in total production, and about another 1mbpd in that two major new projects, Qatif and Haradh III, failed to increase overall production). That's 2.5% of world production and, if that production hadn't gone missing, gasoline in the US likely would still be somewhere in the vicinity of $2/gallon instead of well over $3.

(snip) [What follows is after several thousand words of analysis that included many graphs]

As you can see, the whole of North Ghawar is either off plateau already, or getting close. That is something like 3.9mbpd of production based on last known figures. Whatever of this decline has not already occurred will mostly occur during the next decade.

Southern Ghawar, by contrast, can maintain plateau for decades to come, but there is only 1.7mbpd of production there on last known figures.

While we cannot attribute an exact fraction at this time, it seems likely that not-altogether successful attempts to maintain the north Ghawar plateau to the bitter end explain a significant fraction of the sharp increase in oil rigs that began in 2004, as well as the production declines since that timeframe...

Bottom line: while Saudi Arabia still has significant reserves and will remain a major oil producer for many years to come, Saudi Arabia's oil production may be in decline or soon will be. There are few projects worldwide that combined can make up for the potential losses resulting from Saudi Arabia's growing production problems; the downward spiral may be already here or coming quickly. This will only aggravate the growing worldwide energy crisis.

The post by Staniford is well worth reading, along with the ongoing discussions that have been going on within The Oil Drum community. I've been following the Saudi Arabia discussion for some time but I'm not an oil expert or geologist; the current post, by the way, is over 16,000 words long: consider browsing it before deciding whether to read it. But it's well-reasoned and Staniford tries to help out lay readers from time to time (and many of the comments that follow the post are helpful). I should point out that the post is something of a serious collaboration by a number of oil experts.

Staniford's study is not conclusive and he is forced to infer a great deal of information because of the unwillingness of Saudi Arabia to be forthcoming with its hard data. But it strikes me that Staniford's analysis is somewhat similar to what the analysis division of the CIA or the Energy Department might do if they too did not have a full set of data. That begs the question. What analysis, if any, has the Bush Administration being doing in the last six years and, if there have been studies, what are their results? And if there have not been studies, why haven't there been? Congressman Henry Waxman has his work cut out for him on this issue.

Speaking of the CIA, let me go back to an article from a year and a half ago by Greg Gordon of McClatchy Newspapers:
Former CIA Director James Woolsey paints a dire scenario: A terrorist attack causes a months-long, 6 million-barrel reduction in Saudi Arabia's daily petroleum output, sending the price of oil skyrocketing past $100 a barrel.

Matthew Simmons, an industry banker and author, says the kingdom's oilfields are deteriorating anyway. And a recent New York Times story cited an intelligence report suggesting that the Saudis lack the capacity to pump as much oil as they boast they can.

Even if nothing disrupts the projected flow of Middle East petroleum, Energy Department consultants warned earlier this year that "the world is fast approaching the inevitable peaking" of global oil production - a problem "unlike any faced by modern industrial society." They wrote that the United States and other nations are in a race with the clock to find alternative sources for oil, "the lifeblood of modern civilization," and avoid potential economic disaster.

I'm no fan of former CIA director James Woolsey (a Clinton neocon, he endorsed the war in Iraq far too enthusiastically) but it is interesting to see him talking about the problem of too little oil and the effects it would have on the US. Note too that this was right after Hurricane Katrina when the information spigot opened somewhat on energy issues; however, since then, the mainstream media (the one with the short attention span) has been behaving sluggishly on the story and the Bush Administration has hardly addressed the issue in any comprehensive way beyond favors for Bush's oil friends. If nothing else, Congress needs to push the Bush Administration for an answer to two questions: what's our energy situation and what are you doing about it? We talk about energy independence as if it's a problem that won't be here for twenty years. But our problems have apparently already arrived.

We are a superpower (though damaged somewhat by Bush's incompetence and lack of credibility) and we are still a powerful economy (a bloated, increasingly dysfunctional economy that tilts towards protecting the wealthy regardless of whether they're productive or not). For some time to come, we have the capacity to deal with the issues that will soon be impacting our nation in ways that even media figures earning seven figures can no longer ignore. But it's not certain how long we will have the capacity to act if we continue to ignore these problems.

I've been quietly watching the impact of energy prices and shortages on the poorest nations of the world. I've been hoping to see a comprehensive analysis of slowly shifting oil distribution around the world but nothing has come my way yet. But the anecdotal evidence is building and it's sobering. Part of the reason we're not fully aware of the growing energy crisis may be the result of the poorest countries of the world absorbing the impact as the wealthier nations wind up with excess oil that poor countries can no longer afford. So far, this is an unproven hypothesis but, as I said, the anecdotal evidence is building; here's an AP story by way of Forbes:
An Indian company has cut off oil supplies to landlocked Nepal because it has not been paid millions of dollars, causing widespread fuel shortages across the Himalayan nation, a government spokesman said Thursday.

Vehicles lined up outside several petrol stations still distributing gasoline and diesel in Nepal on Thursday, as Ichcha Bikram Thapa, a spokesman for the Nepal Oil Corporation warned it would soon run out of all reserves.

(snip)

Nepal imports all its oil products from neighboring India through the government-owned Indian Oil Corporation, but NOC has failed to pay up to 5.9 billion rupees ($90 million) in back payments.

George W. Bush seems to be working hard to provide us with multiple reasons for believing he will be remembered as the most failed president in American history. His energy policy has been and remains a travesty.

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