Saudi King Abdullah Drops Quiet Bombshell

[Subdivisions]

Did any of you see this last week:

Saudi Arabia's King Abdullah said he had ordered some new oil discoveries left untapped to preserve oil wealth in the world's top exporter for future generations…

"When there were some new finds, I told them, 'no, leave it in the ground, with grace from god, our children need it'," King Abdullah said…

I did (Google it), but very few here know what the http://en.wikipedia.org/wiki/Export_Land_Model">Export Land Model is and what it means when an oil-producing country decides they've past their peak in production and begin to keep more and more of the oil they would otherwise export. So, I didn't post about it. But, there's been some analysis of His Royal Highness's statement and since we are an importing nation and import 60%+ of our daily oil consumption, I thought it important to tell you about it.

Jim Brown, reporting for http://www.rightsideadvisors.com/">Rightside Advisors, an independent financial research and information provider, reports on the reaction to King Abdullah's remarks:

Emphasis and italics are mine:

Tom Petrie, vice president, Merrill Lynch:

"King Abdullah's quote speaks to the fast-emerging reality of what I call 'practical peak oil.' The Saudis and other exporters are placing a new emphasis on elongating the petroleum exploitation and depletion cycle. This stems from a growing awareness of the challenges of conventional resource maturity, as well as rising resource nationalism. This is likely to result in an earlier occurrence of global peak oil output than many consumers yet recognize."



Chris Skrebowski, editor of Petroleum Review:

"King Abdullah's statement represents the final seal of approval on an emerging Saudi policy of restricting output (the very definition of Export Land Model) to save oil for future generations. In recent years the Saudis have been managing expectations of future capacity steadily downwards. No one now talks of their reaching 15mn b/d. If they reach 12.5mn b/d, while maintaining 1-2mn b/d of 'spare' capacity, we should plan for Saudi production to be 9-11mn b/d for the foreseeable future. (This is despite projections that the world will need 110 million barrels per day by the year 2020. If not from Saudi Arabia, where will all that oil come from?)

"High oil prices and bulging treasuries are giving producing countries the option of maximizing plateau production. (This implies the fact that we're on a production plateau to start with. A plateau infers that there will be a decline at some point.) We may never know if these decisions are being dictated by geology or driven by a political imperative of 'saving oil for later generations.' I suspect it's a mixture of the two.

"In any case, there is now a broad-based move by energy exporters, including Russia, Angola, Azerbaijan, and Norway, to restrict expansion to maximize plateau flows. If this takes hold, then global supplies will reach a peak rather earlier than analysis of future projects would indicate."



Matt Simmons, chairman of Simmons & Co. International:

"This statement by the Supreme Ruler of Saudi Arabia has far-reaching implications. That King Addullah would now instruct his servants to conserve the oil they pump and save some for the kids and grandkids of today's Saudi citizens is most profound.

"King Abdullah has exhibited a sense of wisdom not seen since his brother, King Faisal ruled the Kingdom until his tragic assassination. Assuming his health continues, he might lead Saudi Arabia successfully into a post-peak world and create sustainable middle class wealth for the 90% of Saudi Arabia who had accidentally been left behind.

"The world should bless this intelligent pronouncement. It is a reflection that Twilight set in on the oilfields of Arabia a few years ago."

http://www.rightsideadvisors.com/public/commentary.go/rsa/commentary/comm-energy/20080422_024110_msg.html/Saudi-King-Abdullah-Drops-Quiet-Bombshell-.html">MORE »

This elevates the concept of Peak Oil to a new level. It demonstrates that the most experienced oil nation on earth sees the writing of oil production declines written on the wall. Here are some more notable and respectabel internet media items related to Peak Oil:

From http://tandlnews.com.au/2008/04/22/article/SJSLOHHPJG.html">Transport and Logistics News, Australia - Peak oil in Russia?

From http://www.finfacts.ie/irishfinancenews/article_1013369.shtml">finfacts: There is some speculation that production in some of the older Saudi fields, is reaching a peak. More at link.

From http://www.thedailygreen.com/environmental-news/latest/peak-oil-47042102">Daily Green - 70% of People Believe We're at Peak Oil

http://news.google.com/news?sourceid=navclient&rls=GGLD%2CGGLD%3A2005-02%2CGGLD%3Aen&um=1&tab=wn&hl=en&q=%22Peak+Oil%22&ie=UTF-8&scoring=n">And there plenty more - pro and con

[RaleighNCDUer]

1. What a dastardly thing to do!

He's supposed to just keep on pumping till it's all gone!

Conservation is for wusses!

[Warpy]

8. I doubt it'll be much of a boon to his grandchildren

because the ever increasing oil prices combined with the depletion of existing reserves will eventually spur a great deal of investment in alternative infrastructure, especially for wind and solar and probably a few things we haven't thought of yet.

[Subdivisions]

11. While very true to some extent, solar and wind do nothing

for things that run on oil and oil-based products. Everything from fertilizer to lubricants to medical supplies, thousands of things derived from petro-chemicals.

NOTHING CAN SCALE TO REPLACE OIL WITHOUT STARVING BILLIONS OF PEOPLE.

[mopinko]

14. algae based oil? easy, cheap, and possibly even able to process pollutants.

all you need is sunlight and plastic tubes. squeeze the oil out, and the leftovers are good cattle feed. doesn't even need fresh water. i have no idea why we aren't leaning on factory farms to use this to process their waste, instead of dumping it in rivers. ok, i do know why, but pretty soon, i think we will.

[Subdivisions]

20. Everybody needs to begin thinking about SCALE. Think about

how many things require oil. There is NOTHING, not algae, not abiotic oil, not corn or sugar, NOTHING!

Think about 6,600,000,000 people using products made from oil, beginning with 1,000,000,000 oil-burning vehicles from trucks to mopeds that are running around this planet. Then think about all the plastic from your computer to the dashboard of your car to the coffe maker in your kitchen to the material that makes your clothes to the incredible amount of medical supplies from gloves to syringes to monitors...Need I go on - and on - and on? Because I theoretically could if I could stay awake long enough.

[mopinko]

43. i see no problem with that scale for algae oil.

it takes almost no physical plant. it can go anywhere. it can use any kind of water.
yes, you have to build it. but that could not be easier. if you can show me some math, i might believe you. but just spewing big numbers does not do it.

[Terry in Austin]

51. OK, some math

"...NREL's research showed that one quad (7.5 billion gallons) of biodiesel could be produced from 200,000 hectares of desert land (200,000 hectares is equivalent to 780 square miles, roughly 500,000 acres).

"...to replace all transportation fuels in the US, we would need 140.8 billion gallons of biodiesel, or roughly 19 quads (one quad is roughly 7.5 billion gallons of biodiesel). To produce that amount would require a land mass of almost 15,000 square miles.

- University of New Hampshire

Turns out to be quite a bit of physical plant -- about the size of Maryland, plus Delaware. And while that's being built, the fleet can be converted to diesel power. Guess we'd better get started!

[Subdivisions]

52. 200,000 hectares of desert land? 140 Billion gallons to replace oil?

We have lots of desert.

Let's get busy, indeed!

[mopinko]

55. you are taking that completely out of context.

"physical plant" in that particular article being simple open ponds. right after that it says-

That 15,000 square miles works out to roughly 9.5 million acres - far less than the 450 million acres currently used for crop farming in the US, and the over 500 million acres used as grazing land for farm animals.

it goes on to say that using a closed system, instead of open ponds,

We found that at NREL's yield rates, 15,000 square miles (3.85 million hectares) of algae ponds would be needed to replace all petroleum transportation fuels with biodiesel. At the cost of $80,000 per hectare, that would work out to roughly $308 billion to build the farms.

they go on to talk about using waste as a feedstock, agricultural or human, solves 2 problems at once, and, although slightly more expensive for being scattered, is definitely a doable combination.

so, what was your problem, then?

[Terry in Austin]

59. It's an attractive proposition

No doubt about it, biodiesel from algae should be part of the future energy mix.

Obviously, it's going to be a huge project -- Apollo scale, at least. Even then, we'll probably be disappointed if we expect the same abundance of fuel that we got used to with gasoline from petroleum. Plus, it means replacing all of those cars with diesel-powered ones, which will take some time.

Doable, yes; "no problem," no.

[Warpy]

19. Oil from biological sources can do a lot of what petroleum does

especially once we lift that silly law against growing industrial hemp. Arable land that is poorly used growing timber for the pulp industry can be devoted to hemp with a net environmental benefit.

Thermal depolymerization can be used to clean up stinking, leaking landfills and produce light sweet crude efficiently once we get Big Oil out of the way and start using it. Old plastic and bio waste are its favorite raw materials, but it will reduce just about anything.

There are a lot of technologies already out there that will ease the transition from fossil fuels. The problem for conservative thinkers is that no single solution will work. It will be a patchwork of many different solutions for different problems as petroleum becomes prohibitively expensive.

[The2ndWheel]

37. Yet the solution to healthcare cost expense is to have a single solution

Multiple solutions doesn't work in the world we seem to be creating.

[Subdivisions]

44. With hemp, now you may be talking about a big chunk

of what we're losing in oil supply. But, as you said, only if you can plant enough arable land. And it's great for the manufacture of several things. Might be something to think about AFTER oil is no longer viable. But we must start now. Silly laws indeed.

[Subdivisions]

45. deleted. wrong thread. n/t

[NickB79]

36. We need time to build up the infrastructure though, time we don't have

We should have been working on building our alt. energy infrastructure at least a decade ago. In the meantime, oil production is going to go off a cliff in the next few years; it's already been on a plateau since 2005.

The way I see it playing out, the capital available for alt. energy investment will continue to dry up as the global economy grinds to a halt. The global capital markets are already locking up and we're not even into the worst of the recession/depression yet. Without that capital, no one can afford to build the alternative energy sources that you propose. And due to the scale needed to even make a dent in our demand, we need TRILLIONS of dollars of investment, at a time when the US dollar is worthless and we're running a massive national debt from the war in Iraq. Then we enter a downward spiral, still dependent on conventional, dwindling oil, natural gas and coal supplies.

Race to the bottom.

[Virginia Dare]

2. K&R, when the Saudi King speaks, I listen...n/t

[Ganja Ninja]

3. It is their oil after all.

Just because we were stupid enough to piss away all of our oil doesn't mean they have to do it.

[Subdivisions]

6. Exactly. And my overarching point is that Saudi Arabia

is the world's oil swing- and spare capacity supplier.

If you haven't read up on Export Land Model, do so. Because more and more oil-producers will follow the Saudi's in preserving their own oil for future generations, and, in some cases, just to maintain their lifestyles for the more immediate future.

All this does not bode well for up to 60% of our own oil aquisitions through importing arrangements with those very countries.

[Ganja Ninja]

9. Not to worry, by 2025 our CAFE standards are going to 35 mpg.

:sarcasm:

Seriously we are going to have to run out by the side of the road before people in this country even get a clue that our time is up. We should have set a 35 mpg standard 30 years ago.

[Subdivisions]

13. When Jimmy Carter asked for it. He also promoted solar. If

we had taken it seriously then, we'd be living in a much better world and an economy based substantially on renewable energy as well as mitigation of climate change.

[Ganja Ninja]

27. Yup and when John Anderson wanted to put a 50 cent a gallon

tax on gas people called him a kook. As it stands now we're going to have to have a WWII/WPA style effort to switch over to renewables and bring back rail in this country just for starters. We're in for at least 15 to 25 years of economic doldrums. Gas rationing for sure and probably food rationing at some point.

The bush years were the oilmens last hurrah. From now on the government will have to control every drop of oil we produce or import in order to stabilize the price and keep us on course to energy independence.

[Strelnikov_]

26. Yep. When the 'No Gas' signs start going up later this year

is when it will get peoples attention.

Can you imagine what it is going to be like when the shortages start. Jaysus.

[Subdivisions]

32. I'm already seeing gas stations with plastic bags over

some nozzles. One just across the road from me has six pumps and only one nozzle pump is running. The rest have no fuel.

[DJ13]

4. I think the term "peak oil" is industry codespeak for manipulating supply....

......to maintain artificially high profits.

Saudi Arabia isnt the only country that has mentioned recent large oil discoveries only to later try and quell expectations for increased supply from them.

There seems to be a global pattern of controlling output on the knifes edge of supply shortages in order to keep making the outrageous profits they've been enjoying over the last 5 years.

Adding capacity from large new reserves would run counter to their manipulations.

[Subdivisions]

10. Blame manipulations all you want. The conclusion I've come

to after 2 years of daily analysis and observation, what you are saying is tinfoil hat material. All one has to do to understand that all oil fields eventually play out is to see the images:





Google more.

Or watch for free http://video.google.com/videoplay?docid=8677389869548020370">Oil, Smoke & Mirrors, which does a good job of describing the situation.

[DJ13]

25. The conclusion I've come to is the oil industry is playing the eco crowd for fools

Peak oil is a brilliant PR campaign that feeds into the hatred of oil the ecology people have long had, in effect drawing the same people who hate the oil industry into becoming the biggest defenders of the oil industry agenda that helps them manipulate prices.

Its brilliant.

[Subdivisions]

28. Oh-kay. It's your opinion and you're welcome to it.

You better hope ur right about peak oil and hope that you are not the one who is misguided.

For my part, I'm hoarding like a packrat. Had to move to a larger storage unit.

The more you believe in tinfoil conspiracy, the more flour and rice there is for me and my family.

I'm not taking any chances.

[Ganja Ninja]

34. It doesn't matter if peak oil is real or not.

It's real as far as your pocket book is concerned. As long as we are held hostage to the oil barons of the world we're fucked. The situation is intolerable and the best way to deal with it is to make ourselves energy independent as much as possible by cutting our usage and finding non-traditional domestic alternatives.

[endarkenment]

18. You should look at the US domestic peak in the 70s

it ain't explained by market manipulation, we ran out of new cheap oil to keep up with increased demand. The world is now running out of new cheap oil to keep up with demand. Unlike the domestic peak, we cannot look off-planet for a solution. The head-in-sand approach that St. Reagan et al talked us into took us on a 30 year detour. We are back to where we were in 75, only everyone on the planet is faced with the same issues.

[Subdivisions]

24. Here it is:

See that dip? That was the oil shocks of the '70s. Very important thing to think of when looking at that dip is when imports are witheld from the US, as in the Arab oil embargo.

Now, apply that Hubbert Curve to the entire world's production and you begin to see the problem, if you didn't already.

[Hannah Bell]

48. That makes no sense. The chart is US production. Why would US

production drop when the ME withheld supply?

[Subdivisions]

49. You're right, my bad. I've seen so many world production

charts that I got con-fuzzed. I'll go study up and remind myself of what caused that downturn because, now that you've brought it to my attention, the reason's not jumping to mind.

[NickB79]

39. What other large oil discoveries?

The Bakken field in North Dakota? 4 billion barrels of recoverable oil is only 50 DAYS of global demand.

The massive field found off of Brazil? They're already downgrading their claims from 33 billion barrels to 600 million. Oops.

The Caspian Basin from a few years ago? That was downgraded from 50 billion barrels to 10 billion, and it turned out that a lot of it was sour (high in sulfur, harder to refine).

Anything else I've missed? Because those "large" discoveries are not so large when you consider that the world burns over 80 million barrels of oil PER DAY. They're crumbs compared to the big, tapped oil fields.

[alfredo]

5. I have some nice recipes for preparing dirt sandwiches and soups.

We can't afford not having our food supply local. Fuel costs will drive the cost of food out of the reach of most people.

[Subdivisions]

15. You live in Haiti? But seriously, it's serious there. And today,

Costco in California announced rice and flour rationing because people were shouting and cursing AT EACH OTHER because there was no more flour and rice on the shelves. That's damn near riot-level frustration - IN THE UNITED STATES OF AMERICA ---- TODAY!!!

[alfredo]

17. My friend is in the meat industry. He says farmers are selling off their

stock because they can't afford to feed them. That will mean low prices for now, but next year the price of meat will soar.

[Hannah Bell]

54. link please? n/t

[Fovea]

7. The psychology of scarcity has taken hold.

This is why I figured that as we hit peak, while output might decline in a non-scary way for consumers at first, producers would be inclined to act earlier than later.

Radical elements will want to use oil money like the Afghans use poppies.
There will be a correspondence between oil prices and political instability/resource wars. As the stability trends upward, you get high prices, the other way you get cheap gas at the price of global asymmetrical conflict.

[The Backlash Cometh]

12. You mean somebody was actually thinking about the children?

When it comes time for Allah to call you home, may you find forty virgins in heaven, King Abdullah. I know most of us are pissed off because we have to pay more for gas due to the shortage scare, but we're thrilled that at least the next generation will get a chance to survive our greedy lifestyles.

[Supersedeas]

60. responsible leadership -- refreshing ain't it

[1776Forever]

16. The shows what dinosours these people of his generation are & 20 years from now we won't need it!

:headbang: We just have to keep going green!!!!!!!!!

:bounce: :bounce: :bounce: :bounce: :bounce:

[smoogatz]

21. Brazil just discovered the third largest reserve in the world.

Iraq is number two, and may ultimately prove even bigger than Saudi Arabia. There's lots of oil around; it's just that the "new" reserves are hard to get to right now, either because they're offshore or in a war zone. You can't blame the Saudis for capping production at current levels: I think they're smart enough to read the writing on the wall: the future of oil as the world's primary energy source is in doubt, the current scarcity is temporary, might as well ride it as far as it goes. In the past they've been very careful not to let prices rise too high for fear of sparking a global recession and/or causing industrialized nations to conserve or turn to alternative fuels, depressing the price of oil (remember when oil was around $12 a barrel, as recently as 1998?). Now it's apparent that, with the blessing of the Bush/Cheney cleptocracy, all bets are off.

[Subdivisions]

22. The sum total of Brazil's discoveries, which will not be

onliine for years, maybe up to 12 years, will supply the world's oil demand for less than 9 months.

Then what?

[smoogatz]

33. Then, if we find the pony, whoever's running Iraq will start pumping

away at its 220 billion-or-so barrels of high grade, low cost crude in earnest. But I'm not holding my breath.

[taught_me_patience]

29. We need a "discovery" like this

every year just to keep even with demand. This discovery represents less then 1 year supply of global oil demand.

[NickB79]

40. Uh oh, looks like their math was bad with that Brazilian oil discovery

"Brazil Field Smaller Than Claimed, Credit Suisse Says (Update3)

By Joe Carroll

April 16 (Bloomberg) -- Brazil's Carioca prospect may have 98 percent less crude than a figure cited by the country's oil agency, Credit Suisse Group said, challenging claims that the field is the biggest-ever discovery outside the Middle East.

Haroldo Lima, director of Brazil's National Oil Agency, sent shares of Petroleo Brasileiro SA and other Carioca stakeholders higher when he said April 14 that the offshore field may hold 33 billion barrels of oil. That figure is ``way off the mark,'' Mark Flannery, a Credit Suisse analyst in New York, said today on a conference call with clients.

An estimate of about 600 million barrels ``sounds reasonable,'' Flannery said, adding that the firm isn't yet giving an official assessment of its own. The estimate cited by Lima was probably intended for the entire subsea geological formation known as Sugar Loaf, which encompasses multiple fields, Credit Suisse said."

http://www.bloomberg.com/apps/news?pid=20601072&refer=energy&sid=ao7d7haWD5A8

So, they were WAAAAAY off in their estimates. Even if they did find 33 billion barrels of oil, which they didn't, that is less than TWO years of world oil demand. Two years! Third-largest oil reserve? Do you see the disconnect here?

[endarkenment]

42. yeah big oopsie-doodle on that one

but never mind that sucking sound coming from your wallet. Life is grand. Where is my flag pin?

[Subdivisions]

47. Nice catch. So, there you go. No major liquid oil fields

have been discovered in years. All the big ones are peaking.

If you think there's a solution that can scale up in the next couple years, then speak up because if it works it'll make you rich.

[crimsonblue]

50. Ok, I'll bite...

First of all, it's a bit unreasonable to demand a solution in less than 15 years. But, we can make it a steady pathway towards oil-reduced world. we need a massive increase in the number and power output of power plants, preferably Nuclear (least waste per ton of fuel among fuel burning plants), Solar and Wind (plus throw in whatever source may be feasible for localities-- geothermal, hydroelectric, etc). We are only a few years from having zero emission Coal Plants (and guess who has the largest coal reserves in the world?) and scientists have discovered a way to use carbon (like that emitted from power plants) to make plastics, further decreases our need for oil. The transition from coal to completely reusable fuels (plus nuclear) will be dramatically easier than the our ween off of oil. With the additional output of power plants and the recent gains we've made in battery and solar panel technology, fully electric cars are no longer a pipe dream. My plan to increase non-oil energy production:
1) Identify and eliminate the worst carbon emitting coal and petroleum fed power plants
2) reduce the barriers to entry for alternative energies (tax incentives, rebates, feasible and affordable home units)
3) double the wall thickness on Nuclear power plants to keep the melt-down concern trolls at bay
4) convince the Auto companies that Big Oil is not their friend; possible tax deductions to car manufacturers that use American jobs to mass produce electric vehicles.
now some more long term ideas:
1) transition to a digital power grid, which can provide power on demand, possibly utilizing fiber optic cables (resulting in much much less signal degradation from source to end point). Power would be provided to devices only when necessary (obviously numerous things need dedicated power, but does the outlet where you charge your iPod need to always have power?
2) Further nano-ization of technology. Scientists just recently found ways <http://gizmodo.com/381340/scientists-build-worlds-smallest-transistor-just-one-atom-thick> to utilize single atoms as transistors. What this means is drastically more powerful computers that barely sip electricity.
3) Use knowledge from 2) to embed nanoprocessors into everything electronic, and monitor and adjust power based on need. Plus, it is theoretically possible that these nanoprocessors can be powered via photons (aka the sun), thereby acting as ultra efficient solar cells.

In summary, I'm fairly convinced that the next technological explosion (we are in but the beginning stages) will bring about enough advances to sufficiently put to rest the oil scare.

[Subdivisions]

53. Total electric transportation? Don't know about that but

otherwise you have some good points. I guess I can live with the idea of nukes if there's no other way. I get my power from one right now (Comanche Peak, Glen Rose, TX).

I'm in the solar power business so I'm all for that too. I really like wind.

[Hestia]

23. Have ya'll read Greg Palast's "Armed Madhouse"?

Interesting facts in the later chapters. Venezuela and Iraq have more oil that Saudi Arabia BUT SA controls OPEC. Knowing that they don't have the biggest reserve and not getting that info out, allows them to play big political games. I think the story is bogus so can keep their iron fist over OPEC.

As always, YMMV

[Subdivisions]

31. Sure, geopolitics is part of the equation. But so is geology. And,

yes, I have "Armed Madhouse" and I've heard Palast deny peak oil as a conspiracy. I'm a fan but this time he's wrong. He's obviously a good investigative journalist but he also obviously hasn't investigated peak oil or else he would come to a conclusion quite different than his current "opinion". But he hasn't provided the proof.

[taught_me_patience]

30. This is code-speak for "we cannot pump more oil"

[ColbertWatcher]

35. Who can blame him?

It's their damn oil.

We just need to have some leadership in this country who will have a plan to take care of our children just as the Saudi King is claiming he wants to do for his.

[Rosemary2205]

38. It is their's.

If they manage their resources badly they will suffer, and if they do so wisely they will profit. I'm clueless as to why that alone makes Saudi Arabia "bad".

[IowaGirl]

41. Shhh, don't tell Cheney or we'll have to bomb them, too......

[Subdivisions]

46. Kicking my own thread to say that I had to go out for a bit and

since yesterday gas at my local barometer station when up 6 cents to $3.45 per gallon in exurban north Texas.

[SalmonChantedEvening]

56. George knows what to do.

[PinkyisBlue]

58. I was thinking the same thing.

George and King Abdullah need to spend some quality time together. After a weekend together at Camp David or "the Ranch", who knows how much more oil can be pumped to lower the price?

[bluesmail]

57. Call it 'Just In Case Nothing Else Works' Oil

:shrug: