The Collapse of the Old Oil Order by Michael T. Klare

[robertpaulsen]

This is a great column dealing with current events, past history and possibilities for the future. The last four paragraphs portend an ominous future for the world oil market. Anyone who understands http://en.wikipedia.org/wiki/Export_Land_Model">Jeffrey Brown's Export Land Model knows that this is what Klare is mapping out for us:

The Collapse of the Old Oil Order
How the Petroleum Age Will End
By Michael T. Klare

snip

The critical player is Saudi Arabia, which just increased production to compensate for Libyan losses on the global market. But don’t expect this pattern to hold forever. Assuming the royal family survives the current round of upheavals, it will undoubtedly have to divert more of its daily oil output to satisfy rising domestic consumption levels and fuel local petrochemical industries that could provide a fast-growing, restive population with better-paying jobs.

From 2005 to 2009, Saudis used about 2.3 million barrels daily, leaving about 8.3 million barrels for export. Only if Saudi Arabia continues to provide at least this much oil to international markets could the world even meet its anticipated low-end oil needs. This is not likely to occur. The Saudi royals have expressed reluctance to raise output much above 10 million barrels per day, fearing damage to their remaining fields and so a decline in future income for their many progeny. At the same time, rising domestic demand is expected to consume an ever-increasing share of Saudi Arabia’s net output. In April 2010, the chief executive officer of state-owned Saudi Aramco, Khalid al-Falih, predicted that domestic consumption could reach a staggering 8.3 million barrels per day by 2028, leaving only a few million barrels for export and ensuring that, if the world can’t switch to other energy sources, there will be petroleum starvation.

In other words, if one traces a reasonable trajectory from current developments in the Middle East, the handwriting is already on the wall. Since no other area is capable of replacing the Middle East as the world’s premier oil exporter, the oil economy will shrivel -- and with it, the global economy as a whole.

Consider the recent rise in the price of oil just a faint and early tremor heralding the oilquake to come. Oil won’t disappear from international markets, but in the coming decades it will never reach the volumes needed to satisfy projected world demand, which means that, sooner rather than later, scarcity will become the dominant market condition. Only the rapid development of alternative sources of energy and a dramatic reduction in oil consumption might spare the world the most severe economic repercussions.

http://www.tomdispatch.com/archive/175362/

Something tells me some future President may end up invoking the http://en.wikipedia.org/wiki/Carter_Doctrine">Carter Doctrine before 2028.

[dixiegrrrrl]

1. This deserves a rec.

bookmarking, with thanks for posting.

[4dsc]

2. There is no alternative to oil

the sooner people realize there is no substitute for oil the sooner we can take action. But atlas, people don't like to hear about bad news so they're ignore the warning signs and go about their daily lives.

[GliderGuider]

3. The threat of the net oil export crisis predicted by Brown has yet to penetrate public awareness

It's in that crisis, not just in the peaking of the world oil supply itself, that the real global risk resides. And, just like Peak oil, it's already here. Oil importing nations (especially the USA) need to heed the signals.

Here's what Peak Oil looks like:



And here's what the beginning of the net export crisis looks like:



Now, that red line in the net exports graph is a mathematical projection and is quite probably somewhat too pessimistic. However, the evidence leaves me in no doubt that we passed the peak of both gross oil production and net oil exports five years ago. From here on we are in completely uncharted territory: we have created a complex, highly interdependent global civilization whose lifeblood is now draining away.

[pscot]

11. I had not seen that net exports graph

That's a stunner.Sort of like getting a death sentence. Concentrates the mind wonderfully.

[BobbyBoring]

4. WHY

people can't grasp this is way beyond me. Oil is a finite resource and even Cheney said we had hit peak 7 years ago. That's the only thing he's ever said that I believed.

[texshelters]

5. Carter had it correct on energy

policy and in a few other domestic areas. Reagan proved that being greedy, selfish and pamphagous could work to get Republicans elected and we are dealing with the economics of greed more and more each day.

Good article and I will read the rest. Let's not count out the Mexican and South American oil fields. They will become more important in the next few years.

Now, where are those green jobs people were talking about?

Peace,
Tex Shelters

[GliderGuider]

6. Not Mexico.

Mexico is past its peak and on the downhill slope now since Cantarell has pretty much had it. The only South American nation with significant reserves is Venezuela - their oil is hard to refine and their production has been declining since 1998.

[texshelters]

7. I had read that Mexico still had large reserves, but

perhaps that report was old. And Brazil and the Southern cone have new found reserves of uncertain size. And if Colombia ever has a real peace, they have untapped fields.

But the point is, we need an alternative, whatever the truth about oil in the South.

Peace,
Tex Shelters

[GliderGuider]

8. Regarding oil reserves

Civilization needs to burn a certain amount of oil every day to maintain its level of activity, so the issue is not about the size of the stock, but the rate of the flow. "Peak Oil" has to do with declining flow rates not being able to support increasing levels of economic activity.

For instance Canada has enormous "reserves" of tar sands oil (over 30 billion barrels), but the difficulty and expense of extraction limits the flow rate to about 3 mbpd. The same thing happens even in good fields like Cantarell and Ghawar. At some point you can have vast "reserves" that you can't actually get out of the ground without expending more energy than you get back.

[texshelters]

9. Yes, and like I tried to say

the oil flow in Colombia is low due to the civil war, unrest, union attacks, and sabatoge.

Peace,
Tex Shelters

[GliderGuider]

10. Colombia's situation is interesting, but Brazil is the one to watch.

Colombia has only half the proven reserves of Argentina, a quarter of the reserves of Ecuador, and 1/10 as much as Brazil. With those reserves they are producing as much as Ecuador and Argentina, and about 1/3 as much as Brazil. Basically their R/P ratio is a quarter that of Ecuador or Brazil, meaning they will "run out" four times faster. In fact, their R/P ratio of 5.4 years is the lowest in the producing world except for Thailand, whose output and reserves are both minuscule.

Colombia reached a production peak in 1998, and declined by a third from that peak until 2003 when the slide was arrested. In the two last years for which I have data (2008 and 2009) their production increased about 25% from the plateau of 2003-2006. They currently produce about 10% of South America's oil, compared to 30% for Brazil and 39% for Venezuela.

According to the EIA:

Prior to 2008, Colombia's oil production had remained largely flat for many years. This followed a period of steady decline that started in 1999, when Colombia's oil production peaked at 830,000 bbl/d. The principle cause of the fall in oil production was natural declines at existing oil fields and a lack of sizable new reserve discoveries. However, a combination of changes to the regulatory framework and an improved security situation have contributed to increasing investment in the country. The improvement in Colombia's security situation has also been a significant contributor to the renewed interest by international oil companies. Pipelines and other energy infrastructure are still the targets of attacks by guerrillas, but the number and severity of these attacks is much lower than the past. According to the Colombian government, there were about 11 attacks against pipelines in 2008, versus hundreds of such incidents that occurred per year in the early 2000s.

Colombia may have production problems due to unrest, but those appear to be declining significantly. Given their low levels of reserves I don't see them becoming a production powerhouse. Venezuela is also past their peak, even with an R/P ratio of over 100 years. Brazil is definitely on a roll, though, and could overtake Venezuela any day - if they haven't already.

Here's a look at the South American oil situation, with data from the BP Statistical Review of World Energy 2010: