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Summary of annual meeting of the Association for the Study of Peak Oil-USA (ASPO-USA)

This week I attended the meeting of the US chapter of the Association for the Study of Peak Oil and Gas (ASPO-USA) in Washington, D.C. (http://www.aspousa.org/worldoil2010/). What is interesting about this meeting is the range of backgrounds of the individuals that attend and speak. There were practicing and academic economists, persons working in the oil and gas industry, ecologists, a congressman (Roscoe Bartlett), and a Navy admiral (Lawrence Rice). With all of these backgrounds, the basic consensus of the group is that oil production is in fact peaking now as production has been within 5% of the same level of production around 83 to 85 million barrels per year over the last five years, and will begin to irreversibly decline within the next five years. Additionally, the current economic downturn and high unemployment levels are directly tied to the precipitous rise in oil price from 2003 to summer of 2008.

Simply put, the world economy, and primarily that of the US and the rest of the OECD, could not afford and is not structured to function in a world of oil price > $100/BBL. Southeast Asia is growing up in an oil economy as it peaks out, but they are adjusting from transport systems such as scooters and bicycles. Additionally, as Jeff Rubin (http://www.jeffrubinssmallerworld.com/meet-jeff/) likes to point out (and he’s a good speaker), the OPEC exporting countries are consuming oil at a faster rate than anyone because they keep their prices artificially low (Iran, Saudi Arabia, Venezuela, etc.). Thus, if the Asian economies have to go back soon to lower oil consumption, the adjustment won’t be that drastic. Additionally, the OPEC countries will just export less without imposing anything close to market price on their citizens - a necessity to maintain order. On the other hand, the OECD countries will have a hard time adjusting, and this adjustment of the economy will probably take at least a decade. Think about people in the suburbs of the USA going to carpooling, then trying to move closer in to cities or out of urban life altogether, subsequently leaving some abandoned lots in surburbia with which the remaining inhabitants can use for suburban farming. This is not such a bad outcome depending upon your world outlook. But as Jeff Rubin pointed out this past week (and in his book), this is how the world will get smaller. Oil simply gets too expensive to “lubricate” world transportation of goods and raw materials that is necessary for much of globalized trade.

The opinion of more and more “mainstream” organizations are accepting the reality of peak oil production. Widely mentioned and quoted at the conference was a report by the US military from the Joint Chiefs of Staff: the Joint Operating Environment (JOE) (http://www.jfcom.mil/newslink/storyarchive/2010/JOE2010o.pdf), and I quote a few passages here:

“Peak Oil As the figure at right shows, petroleum must continue to satisfy most of the demand for energy out to 2030. Assuming the most optimistic scenario for improved petroleum production through enhanced recovery means, the development of non-conventional oils (such as oil shales or tar sands) and new discoveries, petroleum production will be hard pressed to meet the expected future demand of 118 million barrels per day.”

“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.”

These statements are strong support for the oncoming peak oil scenario, but the rest of the section on energy does little to make me think that the JOE report is going too far on a limb due to the caveats and continuing discussion of possible 100 million barrel per day (MMBBL/d) production in the future. If you are a real peak oil person, then you believe we’re at the peak now near 85 MMBBL/d.

On the notion of other fossil fuels, there was a good presentation on the “true” economics and production levels from natural gas shales from Arthur Berman - who has often presented interpretations of well data and financial statements that support his view that is quite contrary to the shale gas producers. Presentations from David Rutledge and David Summers regarding much less coal production (and hence CO2 emissions from coal) than used for emissions scenarios (so-called SRES) for the various Intergovernmental Panel on Climate Change (IPCC) climate model simulations. The data are compelling, and along with the recent paper from Tad Patzek on the soon-to-peak world coal production (i.e. 2011). Granted there were audience members who greatly disagreed that we are anywhere near peak coal production, and obviously we do not precisely know the speed of development of new coal mining areas. However, I’d say the evidence is leaning toward a near term peak coal scenario given the remoteness and coal quality of some virgin coal field locations (e.g. lignite in Eastern Siberia).

Please visit the ASPO-USA website for more information as the presentations are uploaded for public viewing and download in the future (http://www.aspousa.org/worldoil2010/).

Posted by Carey King on October 11, 2010 4:35 AM | Permalink