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WORLD OIL SUPPLIES: AT THE TURNING POINT?. John Kaufmann Oregon Department of Energy Pacific NW Waterways Assoc. 15 October, 2008. Oil and Gas at Record Highs. Since 2002: Crude oil 6X Gasoline/diesel 3X Natural gas 3X. www.energytechstocks.com. - PowerPoint PPT Presentation
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WORLD OIL SUPPLIES:AT THE TURNING POINT?
John KaufmannOregon Department of Energy
Pacific NW Waterways Assoc.15 October, 2008
Oil and Gas at Record Highs
Since 2002:
Crude oil 6X
Gasoline/diesel 3X
Natural gas 3X
www.energytechstocks.com
Price Higher Than Last Year; 30% Price Drops Are Common
Data Source: EIAJim Hansen, “Investing in the New Energy Economy”Presented to the ASPO-USA 2008 Peak Oil Conference
US Payments for Foreign Oil
Andrew Wiessman, “Time to Stop Playing Russian Roulette With American Economy”Proceedings, ASPO-USA 2008 Peak Oil Conference
Price Gouging? Manipulation? Speculation?
Speculators profit from conditions – they don’t create them
Price set in market
Many buyers, sellers
Fundamentals in place – tight supplies
Long-Term Supply Leveling Off, Demand Outstrips Production
Demand
Supply
Prices rise; economic problems start here
Today
Increased Demand – China
•Oil use up 7.5% annually
•Imports up 40% last year
•GNP growing 8-10%/year
•2nd largest user of oil
Increased Demand – U.S.
More people
Driving more miles
In less efficient vehicles
Global Oil Production 2002-07
Source: www.UrbanSurvival.com, 5-21-07Data from http://www.eia.doe.gov/emeu/international/contents.html
World Discoveries Peaked in 1960s
Production Exceeds Discoveries Since 1983
David Hughes, Geological Survey of CanadaFrom Campbell, 2004
For Every Barrel We Find …
We use ~6 barrels
Production Follows Discovery
US Discoveries Peaked in 1930, Production in 1971
Already Peaked 2/3 of oil-producing
nations, two major fieldsUSCanadaMexicoNorth Sea
Nigeria?Russia?Saudi Arabia?
IndonesiaVenezuela IranKuwait
Indonesia – Net Importer
www.TheOilDrum.com/node/3657 , Feb. 22, 2008Sources: Matt Mushalik, data from http://tonto.eia.gov/country/index.cfm
Exports
Imports
UK – 2006Mexico?
Mexico
www.theoildrum.com.node/3381, 18-Dec-07
Net Exports of Top 20 Exporters
Mark Reyondols, Anawhata Associates, NSW Australia“Policies to Develop A Low Emissions Transport Sector in Australia,” 10 April 2008From www.theoildrum.com/files/AnawhataGarnaut.pdf
No Spare Productive Capacity
The good news is, the Saudis don’t control the price of oil any more
The bad news is . . . No one does
Top-down: Trend Analysis (Hubbert Methodology)
Trend analysis – historical, statistical Predicted U.S. and other peaks Predicts world peak within next few
years
M. King Hubbert
Hubbert Method Applied to U.S. Production
Jeffrey Brown, “In Defense of Hubbert Linearization”The Oil Drum, June 24, 2007
Bottom-up Analysis: Geologic
Field-by-field
Current production – production declines + new fields + advanced recovery
Peak by 2011
We Know More Than Ever About Where Oil is Found
Robert Beriault,”Peak Oil and the Fate of Humanity.” www.peakoilandhumanity.com
We understand conditions under which oil was formed
Seismic imaging
Millions of exploratory wells
Computer mapping
Oil
Natural Gas
Drilling vs. Production – U.S. Oil and Gas
Nate Hagens, “Charlie Hall: How Much Oil and Gas Will Increased Drilling Provides”www.theoildrum.com, 15-Aug-2008
US Natural Gas Production and Number of Producing Wells
Jean Laherrere, interview with Luis de SousaThe Oil Drum, 4 August 2007
New Discoveries are Smaller, Don’t Reverse the Trend
Effect of ANWR
ANWR
Alaska North Slope
Lower 48
Gail Tverberg, “Peak Oil Overview-March ’08,” www.TheOilDrum.com/node/3726 Strategic Energy Institute, Georgia Institute of Technology
Brazil’s Recent Find Est. 33 billion barrels
Premature – based only on seismic imaging
Early announcements often inflated
1/3 recoverable – i.e., 4 months oil at current use
10 year lead time
Expensive – deepwater, salt formationsPhoto: Marcelo Sayao/EPA
The Guardian, 5 April 2008
Ease of Production:Past and Present
When Will Oil Production Peak?2005 Deffeyes Oil Geologist, Princeton
2006-2007 Bakhtiari Former VP, Iranian National Oil Co.
2007-2009 Simmons Energy Investment Banker, Houston
Before 2010 Goodstein Physicist, CalTech
2010 Campbell Oil Geologist, Ireland
2010 Weng; Pang Xiongqi Chinese National Oil Co.
2010 +/- 2 Skrebowski Editor, “Petroleum Review”
After 2010 World Energy Council
2010-2012 Intl. Energy Agency (Supply, tightness; plateau)
2008-2018 Univ. of Uppsala Sweden
Before 2015 ASPO-USA U.S.
2016 Douglas-Westwood Oil & Gas Market Analysis
After 2014 Wood MacKenzie Energy/Scientific Consultant
2010-2020 Laherrere Oil Geologist, France
After 2025 Shell Oil Major Oil Company
After 2030 CERA Energy Economics Consulting firm
2037 EIA U.S. Govt.
0-5 yrs
5-10 yrs
10+ yrs
“Dean” of Wall Street
Thru 2010 production flat; falls short of demand Inventory drawdown
2012 conventional oil peak Inventories insufficient
2015 all liquids peak
Charles MaxwellWeeden & Co.
Prospects Going ForwardNorth Sea, Mexico decliningCanada oil sands–low flow
rateRussia peaking? Russia vs West in CaspianNigeria in crisisIraq at pre-invasion levelsNuclear IranKashagan, Khurais lateNew fields smaller, more
remote
New Finds Have Little Effect
- USGS P5
- USGS P50
2033
2024
Ken Verosub, UC-Davis, “Petroleum Geology 101”Presented to ASPO-USA 2008 Peak Oil Conference
Geopolitics Invasion of Iraq
Nuclear Iran
Russia-Georgia
Hugo Chavez
Nigeria
Pipeline terrorism
Geopolitics Hastens Peak
Jeff Vail, ”The Geopolitics of Energy”Proceedings, ASPO-USA 2008 Peak Oil Conference
“Geological peaking is driving the geopolitical events.”
~Jeff Vail
Bumpy Plateau / Descent
Price
Production
Jeff Vail, “Predator-Prey Dynamics in Demand Destruction and Oil Prices”www.theoildrum.com/node/4448, 26-Aug-2008
U.S. Energy Mix
Oil 40%
Other 1% Hydro
3%
Nuc. 8%
Coal 23%
Nat. Gas 25%
Oil Does Work for us
In one year a person can perform the work of ~8 gallons of gasoline
Oil Packs Power
Why Oil Matters
“Oil is unique in that it is so strategic in nature. We are not talking about soapflakes or leisurewear here. Energy is truly fundamental to the world’s economy. The Gulf War was a reflection of that reality.
~ Dick Cheney Halliburton, 1999
1970s on Steroids: Inflation, Recession, Unemployment
Impacts – Business & Jobs Higher production,
distribution costs
Supply chain problems
Reduced demand
Social Security Administration, Special Collectionshttp://www.elderweb.com/home/node/9633
Tighter profit margins
Reduced benefits
Business failures
Unemployment
Impacts – Airlines First to Feel Impacts
Fuel represents >30% of their costs
70% of flights are discretionary
Impacts – Trucking / Freight
Energy Returned on Energy Invested, i.e. Net Energy
Old oil 100
Middle-East oil
30
Natural gas 20
Coal 10-20
Hydropower 10-40
Wind 5-10
Nuclear 5
Solar PV ~5
Oil Sands 3
Biodiesel 3
Shale Oil 1.5
Ethanol 1.3
No Magic Bullets Drilling
Nuclear
Coal
Oil Sands
Biofuels
Renewables
Hydrogen
Natural Gas Also Nearing Peak Production
David Hughes, Geological Survey of CanadaData from C.J. Campbell, 2005
Combined Oil/Gas Peak
David Hughes, Geological Survey of CanadaData from C.J. Campbell, 2005
U.S. Natural Gas Production Already in Decline
David Hughes, Geological Survey of CanadaData from USEIA
Location of Natural Gas
Domestic Natural Gas Replacement: LNG
Intense competition
Expensive
Best use?Heat existing homes?Heat new homes?New generation?Displace coal?Transport fuel (CNG)?Feedstock?
Transition fuel?
Coal
3X – 4X increase
Runaway global warming
Peak coal
Nuclear
10X increase
Peak uranium
Oil Sands / Oil Shale
CO2 emissions
Land, water pollution
Low energy return
Low flow rates
Hydrogen
Net energy loser
Bulky to store, transport
3% evaporation loss/day
Doesn’t use existing infrastructure
Biofuels
Ties food price to fuel price
Reduced ecosystem services
Low energy return
Small fraction of our needs
Renewables: Wind and Solar
Non-transportation only
Less concentrated, more expensive
Necessary … but sufficient?
Find Alternatives
Plan for Higher Fuel Prices
Andrew Wiessman, “Time to Stop Playing Russian Roulette With American Economy”Proceedings, ASPO-USA 2008 Peak Oil Conference
Scenarios
Resiliency
No regrets policy
Viability, not cost-effectiveness
Think Carefully About Major Infrastructure Investments
Position yourself for the future
Avoid major stranded investments
Port facilities
Ships
Multi-modal connections
Evaluate Your Market
Demand – what do you ship? Discretionary or
necessary?
Distance? Competition? Will it still pay?
Globalization? Has it peaked?
Begin Now . . . Hirsch Report:
Peak is inevitable
Consequences are serious
Massive effort 20 years lead time $1 trillion
Need oil as bootstrap
Cost of preparing too late will far exceed too soon
Destiny?Contact Info:John Kaufmann503-378-2856
Best Resourceswww.energybulletin.net
www.theoildrum.comwww.postcarbon.org
www.globalpublicmedia.com
Impacts – Tourism … Another Early Casualty?
Impacts – Food & Agriculture
Food sector = 17% of energy
Higher food prices Fertilizer Lower
productivity
Also Variety of food decreases Nutrition, esp. for low-income Shifts in food retailing More household food production,
preservation, preparation
www.timeinc.net/time/magazine.archives/cover/1973/1101730409_400.jpg
Time Magazine, April 9, 1973
Impacts – Vulnerable Population Hit First / Hardest
Food? Medicine? Heat? Rent or mortgage? Transportation?
Impacts – Public & Social Services
Demand for services up
Revenues, charitable contributions down
Stretches already stressed systems
Fractured community networks
Fred. A. Hatfield, www.novanewsnow.com, 22-May-2007
Impacts – Public & Social Services
Reduced health coverageLess preventive, more
emergency carePublic health concerns
Housing, homelessness
Hunger
Substance abuse, domestic violence, property crimes
www.gothamist.com, 11-October-2007
Expand Energy Efficiency Programs
(Dramatically) ramp up existing programs
More and faster
Low Impact Housing
Encourage Efficient & Renewable Transport Choices
Get people out of their cars
Ensure alternatives are safe, convenient Walk Bicycle Ride share Mass transit
Fuel Efficient Vehicles Now, www.fev-now.com
Change Land Use Patterns
Reduce transportation needsPromote walkabilityEasy access to services and
transportation options
from this … to this …
Transit Alternatives
Preserve Local Food Production Capability
Preserve nearby agricultural land
Support local food processing industry
Urban gardens
Farmer’s markets
Co-ops
www.oregonfarmersmarket.org
Preserve Safety Net, Protect Vulnerable Populations
Sense of community
Health care
Public health system
Hunger relief
Shelter
Emergency Planning
Fuel allocation
Food
Transportation
Armed Forces Internationalwww.armedforces-intcom/categories/emergency-planning-and-management
What Can You Do? Sign the Pledge:
Reduce your carbon footprint 5% every year
50% in 14 years
Encourage family, friends to pledge
Carbon Footprint: Annually Reduced 5%
0
5
10
15
20
25
2008 2013 2018 2023 2028 2033 2038 2043 2048
YearTo
ns C
O2
per y
ear
2022: 50%
2036: 75%
www.OregonPeaceWorks.org
5% Solution
How to Reduce Your Footprint
Reduce your housing footprint Heating system, insulation and
windows, appliances, water heating
Reduce your transportation footprint Walk, bike, ride share, public
transit
Buy, consume less Things take energy to produce
and distribute
Eat local, organic, less-processed foods
New Yorker, July 2, 2007
Reinvigorate Rail
Per Capita Oil Consumption
Ken Verosub, UC-Davis, “Petroleum Geology 101”Presented to ASPO-USA 2008 Peak Oil Conference