Peak Energy, and Limits to Growth.

1 06 2008

One hundred years ago today (as I write this in late May), sulfur fumes permeated the air at Masjid-i-Suleiman. A good sign indeed for an experienced oil hand like Reynolds. At 4 am, the drill reached 360 metres under the desert sand, and struck oil. A gusher, 25 metres high, shot into the air. Arabian oil was born.

The site was so remote that it took five days before D’Arcy got word by telegram in England. “If this is true,” he replied, “all our troubles are over.” It was indeed true, and more rigs hit oil elsewhere in Persia, including another huge one in September.

How things have changed. Whatever happened to telegrams? Whatever happened to the oil?

The 20th Century will undoubtedly be remembered for the explosion of technology, steam, then oil, then nuclear and solar powered technology. I stress, powered technology. Most people confuse technology with energy, and unfortunately, they are not interchangable, something fast becoming obvious as we approach the 21st Century era of Peak Energy and limits to growth.

There is so much nonsense in the media today about the reasons why petrol (and diesel of course) is so expensive, it’s mind boggling. Surfing the media’s web blogs’ tailing articles on petrol prices quickly exposes the man in the street’s ignorance of the truth. Not that we can point the finger at ‘people’, the media (outside of publications like this one) is doing very little to educate or inform their readers or viewers.

So, when I prophesise that within as little as four or five years we may not be able to buy any fuel at all, at any price, people of course think I’m a complete nut case. I can understand this. The government is hardly showing signs of any such concerns, when they propose to build new freeways and tunnels to the airport!

Peak Oil is often misconstrued as ‘running out’ of oil. In fact, it’s ‘only’ the point at which roughly half the oil has been extracted. This has been thoroughly documented in the USA which was by far the largest oil producer until after WWII. That nation peaked in 1971, and even though the largest oil field in all of North America (Prudhoe Bay – that’s the bump on the right of the peak, above) was put into service shortly thereafter, the US’ oil production never recovered, inexorably decreasing to its current level, slightly less than 50% of peak. Peak Oil is no theory, the American experience proves this beyond any doubt.

So what of Australia? The news, I’m afraid, is grim indeed. Australia’s oil production peaked in 2000. The Australian Bureau of Agricultural and Resource Economics (ABARE) has, for reasons known only unto itself, consistently mispredicted our future oil production. This is most baffling. Just who are they trying to kid? Do they pick figures out of thin air? Senator Milne and Ian Dunlop, formerly an international oil, gas and coal industry executive, now also challenge our resources peak body for misleading everyone, not just once, but at least five years running. This, in my opinion at least, borders on criminal negligence. One has to realise that very important decisions are made on the back of these predictions, like enlarging airport runways.

When a nation’s oil production peaks, it must then rely on importing from somewhere else. The US imports oil from Canada, Mexico (now collapsing), and Venezuela, with some top up from the Saudis and Africa. We in Australia, you may be surprised to find out, import oil from Vietnam, PNG, the United Arab Emirate, Malaysia, Brunei, and, as a further surprise, New Zealand. We actually get more oil from NZ than we do from Saudi Arabia. http://anz.theoildrum.com/node/3657

There is a problem with importing oil from less developed nations. They want what we have, and are developing at an accelerating pace. Since Vietnam is our biggest single supplier (currently 28% of all imports), let’s analyse their situation.

The figure above shows Vietnam’s oil production, which did not start until 1986, and steadily rose to a peak of just over 400,000 barrels/day in 2004. It has been in decline ever since.

This second figure shows Vietnam’s domestic oil consumption, rising very quickly to 275,000 barrels/day (in 2006) as that country’s economy grew at a mighty 7.1% annually, a doubling of GDP (and by definition, consumption) every ten years. By now, production is probably down to 300,000 barrels/day, and consumption is up to about…….. 300,000 barrels/day!

So where’s our oil going to come from now? And how dare they use it all up! The third figure above shows Vietnam’s nett export in virtual freefall from 175,000 barrels to 90,000 barrels/day in a matter of just five years. At the time of writing (I do not have current figures) it might be possible that like Indonesia (which has just left OPEC – OPEC is after all a group of exporting nations) Vietnam has become a nett oil importer, just like us. Martin Ferguson worries about a deepening trade deficit of some 25 billion dollars from importing oil, but I worry about there being none at all left to buy.

There is not the room here to analyse what is happening to the other nations we import from, but I can tell you that apart from the UAE (representing just 12.5% of our imports), the picture is similar everywhere, including Saudi Arabia. Oil exporting nations are falling like dominoes, and soon there will be none to turn to.

Within five years from now, unless another Bass Straight is found, Australia will be left with a mere 10% of the oil we now take for granted, and it might in fact be less.  This, amazingly, is what one can only conclude from extrapolating ABARE’s own (normally optimistic) data since Australia’s peak occurred.

Now we might find another Bass Straight, but you have to understand that even if another 250,000 barrels/day of Australian oil comes on line over the next five years, we would still only have about one third of what we currently take for granted.  The very best that could be achieved, in my opinion is 50%.  Either way, it is not looking good, and it’s only a matter of time before we start experiencing shortages, perhaps even as early as 2009…..

This is not the time to build new freeways and tunnels to airports (which may even be quasi abandoned within five years as airlines all over the world go belly up), what we need is a major effort to build new rail infrastructure, and other associated public transport. I see no other option but to start rationing fuel, and fairly soon, allowing essential services like farming, medicine, fire brigade and so on to continue operating. Time is short, we must act now. We need visionary leadership.

Suggested reading:

http://anz.theoildrum.com/node/3657

http://www.futurescenarios.org/

http://www.peakoil.org.au

http://groups.yahoo.com/group/roeoz/

http://permaculturenoosa.com.au/

http://austlii.law.uts.edu.au/au/legis/cth/bill_em/lfeab2007303/memo_0.html

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