[Peakoil] Kunstler on 2007

[Antony Barry]

 From <http://www.atlanticfreepress.com/content/view/569/81/> with a  
lot more there.

Oil ended 2006 roughly where it began, at just over $60 a barrel.  
This reassured the public that all talk about Peak Oil was hysterical  
blather from a lunatic fringe. It was reinforced by publication of  
the mendacious Cambridge Energy Research Associates (CERA) report  
issued this fall — a tragic document put out by a giant public  
relations firm representing the oil industry — with the mission of  
staving off windfall profits taxes and other regulatory moves that a  
true resource emergency might recommend.

But beyond this debate, in the background, another ominous trend can  
account for the stalling of oil prices in 2006 — totally unrecognized  
by the public and ignored by the news media: prices on the oil  
futures market leveled off because the Third World has effectively  
dropped out of bidding for it — and using it. They cannot afford it  
at $60-a-barrel. The Third World has entered an era of energy  
destitution and it is manifesting in symptoms such as local resource  
wars, genocides, falling life expectancies, and in many places a near- 
total unraveling of the sociopolitical order. American mall-walkers  
and theme park visitors are oblivious to this tragic process, but it  
is perhaps the major reason why we are not now suffering from $100- 
per-barrel (or greater) oil prices (with the consequent unraveling of  
our sociopolitical and economic order).

The major trend on the oil scene the past 12 months is the apparent  
inability of the world to lift total production above 85 million  
barrels a day — with demand now rising above that line. It is unclear  
how much more demand destruction will come out of the Third World  
before bidding intensifies between the developed nations. One  
commentator in particular, Dallas geologist Jeffrey Brown —a frequent  
contributor on the web's best oil debate site, TheOilDrum.com — is  
advancing the idea that we are entering an oil export crisis that  
will presage a more general permanent world-wide oil emergency. Brown  
holds that the major oil exporting nations are using so much of their  
own product, because of rising populations, that their net exports  
are falling at an alarming rate, perhaps as much as 9 percent  
annually. This trend combines with general depletion rates now said  
to be around 3 percent a year.

The question of total oil reserves around the world remains somewhat  
murky, but Brown, Kenneth Deffeyes of Princeton, and others using a  
straightforward mathematical model, have stated that the world is  
roughly at the same point in all-time production as the Lower-48  
United States was at in 1970, when America passed its all-time  
production peak. We know for certain that three of the four super  
giant oil fields (Daqing in China; Cantarell in Mexico; Burgan in  
Kuwait) are past peak and there is plenty of evidence that the  
greatest of them all, 50-year-old Ghawar in Saudi Arabia is not only  
past peak but perhaps "crashing" into a super-steep decline.

Discovery of new oil to replace the production from declining fields  
remains paltry. Chevron announced it's "Jack" discovery in the  
deepwater Gulf of Mexico with great fanfare this year, but neither  
conclusively demonstrated that all the wished-for oil was down there  
(between 3 and 15 billion barrels, Chevron said) or that they could  
get it out of there in a way that made sense economically, since the  
oil was extraordinarily deep and difficult to lift up.

Meanwhile, companies developing tar sand production in Alberta  
announced that their costs of production were rising substantially,  
while a reckoning lay ahead as to how much of Canada's fast- 
disappearing natural gas reserves will be squandered in melting tar.  
The oil shale project is going nowhere. American corporate farmers  
have entered into a racket with congress to subsidize ethanol  
production from corn and biodiesel fuel from soybeans. The American  
public remains ignorant of the tragic futility of this project, which  
depends on oil-and-gas "inputs" to keep the crop yields up and  
ultimately is a net energy "loser." As the world crosses into the  
uncharted territory of "The Long Emergency," Americans will find  
themselves having to chose between eating food and making fuel to  
keep the car engines running.

The signal failure of public debate in this country is embodied in  
our obsession with this particular theme — how to keep the cars  
running by other means at all costs. Everybody from the greenest  
enviros to the hoariest neoliberal free market pimps believe that  
this is the only thing we need to worry about or talk about. The  
truth, of course, is that we have to make other arrangements for  
virtually all the major activities of everyday life — farming,  
commerce, transport, settlement patterns — but we are so over- 
invested in our suburban infrastructure that we cannot face this  
reality.

The bottom line for oil in 2007: expect the bidding on the futures  
markets to regain intensity between the US, China, Europe, and Japan.  
A contracting US economy could take some demand out of the picture,  
but the sad truth is that we burn up most of the oil we use in cars,  
and American life is now so hopelessly based on incessant motoring  
that citizens cannot even go down to the unemployment office without  
driving. Geopolitical events can only make the oil supply situation  
worse and probably will. (See ahead.)

We are probably also in the early stages of a natural gas crisis in  
the US. Over the next decade, the gap between US demand for natural  
gas and dwindling supply may amount to one-and-a-half times the  
current equivalent of our oil imports. This is a staggering deficit.  
Natural gas is used for heating in more than half the houses in the  
US and accounts for just under 20 percent of our total electricity  
production. Domestic supply is crashing. We are drilling as fast as  
we can, with more and more rigs each year, just to to keep up. To  
make matters worse, the means of gas delivery — through a vast web of  
pipeline networks around the nation — makes "just-in-time" delivery  
the norm and, tragically, also makes "just-in-time" pricing normal,  
too. Thus, gas prices are responding only to the shortest-term  
signals — for instance, unusually mild winter weather — rather than  
to the catastrophic long-term reserve picture. Finally, we are  
unlikely to solve our natural gas problems with imports for technical  
reasons having to do with the cost and difficulty of moving the stuff  
by means other than pipelines and for geopolitical reasons, namely  
that most of the remaining gas in the world is in Asia. Bottom line:  
we could enter a home heating and electricity production crisis  
anytime. Massive price increases are likely to be required in order  
to reduce demand to the level of available supplies. This will be one  
of the major factors in the disabling of suburbia — which is to say,  
normal American life.

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