Archive for the 'europe' Category
The June 2008 edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.42 MB, 21 pp).
Figure 1 - World Liquids Fuel Production January 2002 - May 2008
A summary and latest graphics below the fold.[break]
Latest Developments:
1) Total liquids - In May world production of total liquids increased by 490,000 barrels per day from April according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 86.60 million b/d. Average global production in 2007 was 85.41 million b/d according to the IEA. In the first five months of 2008 an average of 86.82 million b/d was produced. The US Energy Information Administration (EIA) in their International Petroleum Monthly puts average global 2007 production at 84.55 million b/d and the first three months of 2008 at 85.70 million b/d.
2) Conventional crude - Latest available figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates decreased by 134,000 b/d from February to March. All time high crude oil production now stands at 74.63 million b/d in February 2008.
A selection of charts from this edition:
Figure 2 - World Crude Oil Production January 2002 - Narch 2008
Figure 3 - Non-OPEC Crude Oil Production January 2002 - Narch 2008
Figure 4 - Saudi Arabia Crude Oil & Liquids Fuel Production January 2005 - May 2008
Figure 5 - Russia Crude Oil & Liquids Fuel Production January 2005 - May 2008
Figure 6 - Mexico Crude Oil & Liquids Fuel Production January 2005 - May 2008
Figure 7 - United Kingdom Crude Oil & Liquids Fuel Production January 2005 - May 2008
Figure 8 - Nigeria Crude Oil Production January 2002 - May 2008
The June 2008 edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.42 MB, 21 pp).
Figure 1 - World Liquids Fuel Production January 2002 - May 2008
A summary and latest graphics below the fold.[break]
Latest Developments:
1) Total liquids - In May world production of total liquids increased by 490,000 barrels per day from April according to the latest figures of the International Energy Agency (IEA). Resulting in total world liquids production of 86.60 million b/d. Average global production in 2007 was 85.41 million b/d according to the IEA. In the first five months of 2008 an average of 86.82 million b/d was produced. The US Energy Information Administration (EIA) in their International Petroleum Monthly puts average global 2007 production at 84.55 million b/d and the first three months of 2008 at 85.70 million b/d.
2) Conventional crude - Latest available figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates decreased by 134,000 b/d from February to March. All time high crude oil production now stands at 74.63 million b/d in February 2008.
A selection of charts from this edition:
Figure 2 - World Crude Oil Production January 2002 - Narch 2008
Figure 3 - Non-OPEC Crude Oil Production January 2002 - Narch 2008
Figure 4 - Saudi Arabia Crude Oil & Liquids Fuel Production January 2005 - May 2008
Figure 5 - Russia Crude Oil & Liquids Fuel Production January 2005 - May 2008
Figure 6 - Mexico Crude Oil & Liquids Fuel Production January 2005 - May 2008
Figure 7 - United Kingdom Crude Oil & Liquids Fuel Production January 2005 - May 2008
Figure 8 - Nigeria Crude Oil Production January 2002 - May 2008
The hydrogen and ethanol powered car
[break]
Riots won’t bring oil prices down. Andris Piebalgs blog entry from 6th June. My emphasis added.
Last Tuesday I was a witness of a very sad episode. Belgian riot police employed force against a group of French and Italian fishermen marching to the European quarter to protest violently against high price of fuel. A car crash occurred as a consequence of the riots. The frustration of the demonstration is easy to understand, but certainly demonstrations and street fights are not the answer to this problem. Oil prices are high and will go higher. No demonstration can change that.
In the past, periods of relatively expensive crude, were followed by periods of cheap oil due to temporary factors like the first Gulf war. Currently, as well, there are temporary factors that are influencing oil prices, like the boom in commodities markets, geopolitical situation in several key producing areas, the weakening of the dollar or the turmoil in global financial markets.
However, the real drivers of oil price escalade have a structural nature. You all know the offer and demand law. If offer decreases, price increases. If there is a growth on demand, there is also a growth on price. If, at the same time offer decreases and demand increases then, price skyrockets. This is precisely what is happening in oil markets.
In year 2000 China had 4 million cars. In 2005 - already 19 million cars. It is expected that in 2010 the Chinese car fleet will be 55 million and 130 million in 2020. India is following a similar trend, and the economies of the United States and Europe continue to devour oil in large quantities. More and more people compete for an increasingly scarce commodity. We all know that oil will run out some day. The exact date is certainly under discussion, but there is a fact that nobody can deny, getting oil out of the earth is now much more difficult and expensive that it used to be.
The easy sources of oil are already in use. Oil companies are currently exploring in deep seas or in frozen and inaccessible regions. Geopolitical uncertainties reign in oil producing areas, while there is a growing tendency among producing countries to nationalise their resources, or make foreign investments more difficult. There is a growing shortage of highly skilled working force and exploration and production of oil is becoming a high tech activity, extremely expensive.
We all know the consequences. The barrel is currently around 130$, 300% more expensive than only 3 years ago. Experts are talking about prices of 200$ per barrel for next year only. At this levels, even non-conventional oil sources, such as heavy crude or tar sands become attractive, despite its awful CO2 foot print and high energy consumption.
So what is the solution? Well, we have to move away from oil. This is what the European Energy Policy is all about.We need to reduce demand with more efficient transport, industry and housing. We need to promote alternative fuels, like biofuels, electricity or hydrogen; we need to change to cleaner and more efficient transport modes like rail, short sea shipping, or public transport. And in the meantime, we need to continue our dialog with oil producers to encourage them to produce more and to supply the markets better. On 24th of June, I will meet ministers of the OPEC countries to discuss with them on this issue.
The era of cheap and easily available oil is over. We need to move away from black gold and put our efforts in a low carbon economy. The sooner we do that, the better.
My reply
Dear Andris,
This entry is the most appalling muddled mess - which is a direct reflection of EU energy policy. There are shafts of sunlight mixed in with utter rubbish.
Each time I have left an entry here I have told you that we are in the early stages of a full blown energy crisis. It is a great pity that you have waited until oil hit $130 per barrel and for French fisherman to riot before realising that this is indeed the case. Of course if you and your team were up to the job, you would be able to study the oil supply and demand data published by the IEA, the EIA and BP and conclude that an energy crisis is on the way in advance and put in place effective strategies to mitigate for this. But no, your approach is reactive, well behind the curve, wrongly focussed and without a substantial re-writing of the EU Energy policy, it is destined to fail. The riots in Belgium and Iberia are partly your fault. You are the EU energy commissioner, pipe dreaming whilst EU energy security drains away.
It is encouraging to see that you finally understand that demand for oil, gas and coal are rising whilst supply for oil at least is static. Rising demand against static supply is controlled by escalating price, encouraging conservation and pricing poor Europeans out of the energy market. You should by now understand that when poor people get priced out of the energy market they riot.
The next thing you need to grasp with some urgency is that oil supply will not stay static for long. IT IS GOING TO GO DOWN ONE DAY VERY SOON. (2012±3 years) And then the problems we are experiencing now will get worse by a factor of 100 or more. WHAT ARE YOU GOING TO DO ABOUT THIS?
The EU and the OECD in general has absolutely no control over raising global oil supplies. You seem to think that OPEC does, BUT YOU DON'T UNDERSTAND THAT OPEC ARE PUMPING FLAT OUT. The IEA data shows that their reserve capacity is near zero. So the only control OPEC has would be to reduce supply in order to conserve their dwindling reserves for future generations.
Thus, the only part of the equation that the EU can control is demand. The EU needs to introduce with some urgency measures to reduce demand for oil and natural gas. And here I believe you make some good points. We need solid, urgent plans to radically transform our transportation systems. To be blunt, cheap air travel for all will not be part of this future. Shipping, canals, and electrified mass transit and electric cars are the future. We need someone with vision to stimulate pilot V2G projects across Europe.
Energy conservation and energy efficiency must be vital cornerstones of the EU energy policy. I believe you understand that but you don't seem to understand what energy efficiency means. (hence you drive one of the least energy efficient cars ever produced). Producing H uses more energy than can be recovered. It is an energy sink, a waste of energy and a waste of time (apart from in some isolated special cases). Ethanol consumes almost as much energy as it produces and falls into the same category - a waste of time and precious energy. You are converting Gold (nat gas) to Lead (ethanol - anecdote borrowed from Matt Simmons). As a guiding beacon if the eroei of an energy producing system is less than 7 then it must be ignored. It does not produce sufficient net energy to run society - and so pursuing the twin follies of H and ethanol will drag Europe off the net energy cliff.
In essence what you have done in this blog entry is to re-package the wholly misguided EU energy policy that is predicated on climate change and trying now to sell this rubbish as a solution to the emerging energy crisis.
From here there are two ways forward. You either have to admit that the current energy policy is a shambolic mess, tear it up and start over - but this needs to be done urgently, within a matter of months. Or you need to resign and let someone else do this vital job.
Euan Mearns BSc PhD
Editor The Oil Drum EuropePS I wholly endorse tonyw's comment up thread - if you want to reduce demand for oil today we need pan-european speed limits and legislation on gas guzzlers. Let these fine German engineers turn their attention to efficiency instead of speed and power.
If you feel strongly about EU energy policy then please leave a comment on Andris Piebalgs blog on the thread - Riots won't bring oil prices down
The EU Commission contemplating driving Europe and all its citizens off the net energy cliff. The Oil Drum's geologists, chemists, physicists, economists, bankers and engineers are in pursuit, trying to stop them. Will they get there in time?
Pictures from Thelma and Louise who were having a great time on a girls night out until they made a mistake. And one thing lead to another....
It all started in Spain, it quickly spread to Portugal and southern France. Lorry drivers are on the streets and on roads protesting against high fuel prices and bringing normal day life to a stand still.
Spanish lorry drivers blocking main access roads to Madrid. [break] This is a crosspost from the European Tribune.
[Update IV : 13-06-2008 19h00]
Spotty shortages of fresh goods, petrol and diesel are still enduring. This morning the radio reported that the route connections between Algarve and Andalucía were still being blocked, disrupting fuel supplies to the former region. In Spain fresh goods are still a problem in some supermarkets, with picket lines now blockading access to central warehouses that supply retailers. It is likely that these products will see price hikes during the following days, as supply falls from normal levels.
Up to this fifth day of strike there have been more than 1000 protesters detained by the police and 600 others have been fined for ill driving practices. But on the overall order seems to have been restored and life appears to coming back to normal for the regular citizen.
With 800 thousand people deciding the fate of almost 500 million, the news on the hauliers strike are fading away into background noise. Strikers tiredness and lack of interest by the media will probably give the fatal blow to the protest, by Monday we'll know for sure.
Tonight Europe goes to bed with another institutional crisis in its hands. The big difference this time is that Peak Oil and the associated economic hardship won't wait.
[Update III : 12-06-2008 17h00]
Life is slowly coming back to normal in Spain. A deal was struck between government and representatives of the vast majority of hauliers during last nigh, granting several fiscal and social benefits to the industry, but leaving diesel taxes untouched. The hauliers' associations behind the blockade reunited today after lunch and rejected the government's proposals, vowing to continue protests (the main claim for a minimum service fare remains unattended). Check striker's demands and the government's offers [hat tip Migeru].
The police is on the roads, clearing blockaded routes and facing the picket lines all around the country; there have been insistent reports of arrests throughout the day. Escort is being provided by the police to hauliers that request so, protecting lorries from raging blockaders. There's an all round improvement in traffic. Today's reported actions have been mainly of slow marches that didn't had much impact on the returning normality.
Stores are getting shipments again, although still rationing some high demand fresh goods. Factories are slowly coming back to operation, even if partially, and fuel is reaching filling stations again.
For tomorrow the Spanish association of taxi drivers is calling for a national strike, claiming a fare hike of at least 3 euro cents per kilometre. Negotiations will take place still today to avoid the stoppage.
[Update II : 12-06-2008 08h30]
A few hours ago the Portuguese government yielded, striking a deal with protesting hauliers. While taxes on diesel remain in place, a package of measures was presented by the government that includes reduced toll fares and income tax exemptions, representing a substantial subsidy to the industry. Economic activities non dependent on Spanish trade routes should go back to normal in the next 48 hours.
Meanwhile in Spain a deal has been struck with some hauliers organizations, but not with those in action. Reports of violence are increasing, pierced tires, broken wind shields, cargoes destroyed; yesterday some lorries were set in fire during the night, resulting in serious burns on at least one driver asleep inside. The Spanish government is calling for “cogent” action by police forces against the picket lines.
 Click for more pictures of the blockade in Spain |
There are several hundred lorries stranded in Spain, many of them Portuguese. Those holding fresh cargoes are running out of fuel to maintain their goods. Speaking to the media some of the drivers stranded considered leaving their lorries on the road and simply return home by other means.
Elsewhere, Irish fishermen are suspending the blockade to the ports of Cork and Waterford. Belgian drivers are planning action against high fuel prices for the 19th and 20th of the month, considering a blockade of Brussels [hat tip Migeru].
[Update I : 11-06-2008 21h00]
Lisbon ran out of diesel during the afternoon and petrol will run out still today. Milk, vegetables and fruit are becoming very scarce in stores.
Towing lorry operators have also paralysed south of the Tagus, impairing all on road assistance to motorists. Cars with engine problems are piling up on the road sides all across Alentejo and Algarve.
Farmers and fishermen were also in protest today in Spain, setting demonstrations in several cities of the country. TVE had some sad pictures to show today, with confrontations between the police and demonstrators resulting in numerous injured. At least Madrid is also feeling the same kind of shortages in supermarkets as in Lisbon; fresh meat is becoming an especially scarce product.
High oil prices are impairing one of the most important industries in Europe, road freight transport. Present diesel prices (of which about 60% are taxes) are eating the profit margins of lorry owners. Last Friday a strike started in Spain claiming for help from the government, with some 12 000 transport companies adhering.
During the weekend in Portugal lorry owners called a strike at a national meeting with the main intention of joining the announced actions by the Spanish unions. But at the same time the employed lorry driver's Union was (and still is) in negotiations with the Portuguese government. The Union called on its members to not go on strike so negotiations could continue. Feeling isolated the lorry owners transformed the strike into a blockade.
These owners are mainly small businessmen that operate with their own lorry, the big companies don't seem to be involved. Less than one fourth of the country's drivers are in the protest but the blockade is affecting most of them, the main connections to Spain have been blocked as so the major oil products storage facilities. The objective is clear: bringing the country to a halt.
In many blocking spots protesters are menacing to stone those who may try to break it. Old tyres have been set to fire at road junctions and boarder crossings.
A blockade picket in Portugal.
In Spain mobilization seems to be more deeper, yesterday several access roads to Madrid were blocked. As here, main border routes are being blocked, accumulating lorries in a kind of no man's land. In some places where bolder drivers tried to break the blockade the protesters managed to halt lorries and dumped their cargo. There are news of roads blocked also in the northern side of the Pyrenees, with French protesters mobilizing at least as far as Bordeaux.
Video from Reuters.
Yesterday things heated up between protesting drivers and those eager to deliver their cargoes. One protester was killed in Alcanena, Portugal when a driver tried to break a blockade at an important freight route. Hours later a similar situation happened in Granada, Spain when a van hit a blocking picket also killing one protester. A video digest of Tuesday's protests can be found at Euronews.
From a round on the media these are the main impacts to normal life:
- Traffic jams are affecting visibly commuter traffic in Spain with Madrid, Barcelona and Valencia being hardest hit.
- The National Guard has been escorting oil products convoys both to Madrid and Lisbon, densely populated areas that could rapidly dry out of fuel. This morning many filling stations in the northern suburbs of Lisbon had already ran out of diesel and 95 octane petrol.
- Diesel especially is becoming scarce in many filling stations all across the Peninsula. The Algarve seems to be on of the most hit regions, to where many people travelled taking the chance of an extended weekend to spend a few days in the southern warm shores.
- Many factories are closing operations for lack of supply of all varieties of goods. Car factories, an important sector in the Peninsula, are already paralysing, lacking parts to continue operations.
- Fresh goods are disappearing from the supermarket shelves. Yesterday fresh fish was already impossible to find.
- Milk will be unavailable in less than two days. Producers and storage facilities are dumping milk they can't send to the markets.
- Poultry producers are running out of feedstock. A massive die off could take place if new supplies don't arrive in the next few days
- Fuel supplies were suspended at the Lisbon airport, but up to the moment no flights have been cancelled. Air line companies have been filling their aircrafts at other airports in Oporto and Funchal.
Today other states will join the protest. Irish fishermen are set to blockade Cork's port and Scottish lorry drivers will take the road from Glasgow to Edinburgh on a slow pace, disrupting traffic in Scotland's most transited highway.
How all these actions can impact oil production in Saudi or Russia is hard to envision. Governments will either capitulate and reduce taxes (something that up to now no one seems willing to do) or recur to force and send the guard and the police against the drivers. No option is pleasant, and none will bring the international oil market back into balance.
I can't help feeling that for road transport these are the last breaths of a dying industry.
Previously at TOD:E: Post Peak Italy.
The people of the country have spoken, for good or ill. That must be respected.
Accordingly, I do not want to see another referendum - the outcome of this one must be heeded. The people are sovereign. The Constitution, deeply flawed as it is, governs this country over anything else; it is the source of power exercised by the legislative, judicial and executive branches of government in Ireland. It is also the source of our connection to the EU, but that does not mean it should not be altered to suit the EU over Ireland.
Listening to the tallies as they come in, the socio-economic breakdown was very clear - working class voters opposed it very much. It is purely my own view, but I’d be inclined to suggest that the left-wing arguments against privatisation were the ones that had the most impact, as opposed to the Libertas arguments. It was not, I believe, an anti-government vote - the two main opposition parties called for a Yes vote along with the Government. I do not believe it was a Eurosceptic vote either. Ireland is pro-Europe and pro-EU.
I never agreed with the the way the Treaty was being ratified across Europe and that was my primary reason for voting no. I know some people reading this will be very displeased at the outcome, and I am genuinely sorry for that. I want to see Europe integrated better than it is now. But not this way. 3 million people determining the outcome of a treaty by a direct vote, with the other several hundred million not having this same very powerful method of determining the outcome, is, to my mind, profoundly undemocratic. I do not believe either, that the people in the other EU member states gave their governments a mandate to decide on this treaty; they gave their governments a mandate to govern on domestic issues.
Another issue that bothered me was the Laval case. I hummed and hawed over this one, initially inclined to accept it and hope it was a one off. The Laval case gives rise to fundamental questions under EU law, namely, whether Community law can restrict or prohibit trade unions in one Member State taking industrial action. It also considers whether the application of collective agreements in a host Member State be restricted by EU law.
In the case, Swedish unions took action against a Latvian construction company - Laval - over the working conditions of Latvian workers refurbishing a school in a town called Vaxholm. Laval refused to sign a collective agreement, and a blockade of the work place was initiated by the trade unions as a consequence. The Swedish Labour Court referred the case to the European Court of Justice (ECJ).
In December 2007, the ECJ indicated that the right to strike is a fundamental right, but not as fundamental as the right of businesses to supply cross-border services. It is my opinion that the ruling amounts to a licence for social dumping, and key features of national industrial relations systems face being superseded by the free movement provisions. This puts a fundamental right of an individual or group of individuals at a disadvantage to a company. It is my view that this is wrong. I had to vote no on this ground also.
I spent a great deal of time considering how I would vote on this momentous treaty. I am satisfied with my vote, and I am satisfied that I considered it from a European, and not an Irish perspective. I am a passionate European. I am not a Euro-sceptic. This was my first No vote on a European referendum. I fervently hope that it will be my last.
Basically his arguments boil down to 3 points: there is no speculation (prices are justified by fundamentals, markets work fine), renewable energy is not serious (too small, mostly), and there is no peak oil (plenty of reserves around). and of course, his solution is simple: oil majors are ready to invest and let market forces solve the supply problem, but political obstacles prevent them, and governments must therefore help by removing these.
What is true is that speculation is not to blame, and that there are political obstacles to investment today. The rest is not quite so true. And that mix, which I expect is deliberate, has one main subtext: "don't worry" (and don't try to move off oil). [break] OK, here's the text in full.
When I became BP chief executive just over a year ago, I warned that the supply and demand balance for energy was very tight. But, in common with most people, I never expected to see the oil price go quite as high, quite as rapidly, as it has in the past few months.
Ah, "most people." This could be seen as yet another indictment of the common wisdom of the "serious" people (I don't think he includes anybody else amongst "people") that pontificate day in and day out in newspapers, think tanks and industry fora and, somehow, still have more credibility than those that have forecast current events with a lot more success.
Of course, short term movements cannot be predicted easily, but long term trends, especially such momentous ones as the irresistible increase in oil prices over the past 5 years, can and have been announced by many commentators, which have been too easily dismissed.
While it's easy to crow now, a call for accountability of the pundits would still seem to be appropriate.
Unsurprisingly, with consumers and businesses everywhere facing much higher fuel costs, emotions are running high. I understand those feelings. Governments and the energy industry are urgently looking for solutions. But if we are to act sensibly, we must start with the facts. We must accept the world as it is, not as we hope for it to be.
You're fucked, and pissed off, but let me tell you how it really is not our fault!
On Wednesday, BP is launching the latest edition of the BP Statistical Review of World Energy. This is the 57th year of its existence and during that time the review has established a reputation as one of the most reliable sources for objective energy data worldwide. At times such as these it is a useful analytical tool for those both inside and outside the industry.
Yes, let's not mention that OPEC (and a few other) country reserves have not been independently verified for more than 20 years, and that BP uses official national data from these countries without questioning them. Let others quote them as authoritative, and let the lies be repeated and disseminated unquestioned.
(From an earlier Oil Drum story, using BP numbers from 2 years ago)
It also exposes some myths that need to be put to rest if we are to find the right solutions to big global problems such as energy security and climate change.
While it is welcome to see climate change mentioned, it is more interesting to note that the energy side of the equation is framed in terms of security and not in terms of scarcity. Hawyard will remain within that "safe" frame for the rest of the article.
The first myth is that high prices are caused by technical factors, such as speculation. While these factors may have an impact on the margins, the data clearly show that high prices are really caused by economic fundamentals.Global energy demand growth in 2007 was above average for the fifth year in a row, driven by the fastest period of economic growth since the early 1970s. Demand growth is concentrated in those emerging nations that also subsidise fuel prices, such as China, India and - increasingly - the oil-producing nations themselves.
It is only natural that speculation would come near the top of issues touched upon by Hayward, given the cries we hear around the world, and while oil majors are not the main culprits (financiers enjoy that "honor"), they are not far behind. And of course, given that this is an issue where he is on strong ground (speculation is at best a distraction, at worse a scapegoat) he can score some easy points.
But he actually makes a convincing case, in line with what the IEA has stated yesterday (even if it seems to have been spinned very differently in most media outlets):
Yet energy supply has struggled to respond. Production by the Organisation of the Petroleum Exporting Countries fell by 350,000 barrels of oil a day last year. The production situation is even more challenging in the market-oriented nations of the Organisation for Economic Co-operation and Development, where many existing basins are maturing fast. In Britain, for instance, North Sea gas production recorded the world's lar-gest decline for the second year in a row, falling by 10 per cent in 2007. UK oil output rose very slightly, but this is a one-off, based on a single big new field. Production remains on a downward trend.The last time oil prices surged to this kind of level, 30 years ago, new production from the North Sea helped bring prices down. This time, new OECD production will have to come from frontier provinces such as the Canadian oil sands, the Arctic and the deep waters of the Gulf of Mexico.
Another big impact on supply is Russia, where production has begun to decline. It is a little-known fact that, until now, the growing demand for oil from China and India in recent years has been met almost barrel for barrel by rising supply from Russia.
His diagnosis here is spot on, and it is very important that it be made by him (and the IEA) rather than only by pesky bloggers, and that it include a number of points that have yet to make it into the "common wisdom":
- demand growth is still very strong, and it is not just coming from China, it is also increasingly coming from oil-producing countries themselves;
- production is stagnating overall, and declining in a number of regions: OPEC (despite its apparently plentiful reserves, Russia and, more significantly, in regions that "we" control, like the North Sea and the US (no explanation given);
- incremental production can only come from "frontier" areas, ie expensive and low EROEI (although Hayward does not touch that concept, of course). There is no sivler bullet or quick fix like Alaska and North Sea were 30 years ago.
Access to resources for international oil companies such as BP remains very restricted. Resource nationalism is on the rise. That is important because it is the oil majors that have some of the best technology for bringing difficult resources on-stream.
which sets the stage for the bigger point:
Myth number two is that the world is running out of hydrocarbons. Not so. The world has ample resources, with more than 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. The problems in bringing on new production are not so much below ground as above it, and not geological but political.
The standard "we're not running out of oil, it's just those pesky governments blocking us" argument, ie the claim that this is just a temporary problem that has an easy fix if a few selfish bureaucrats/nationalists could only get out of the way. This is dangerous on two levels:
- one is to think that political obstacles are minor, ie that it will be easy to force Russia or Saudi Arabia (or Venezuela or Iran or even US politicians) to open their door or the spigot. This perpetuates the narrative that other countries in the planet are here to provide us with the necessary goods or services, independently of their own priorities or needs; it conveys that their sovereignty is a fiction that we tolerate with just a bit too much patience, but that we could push out of the way if it really became necessary; more generally, it dismisses completely the notion that our economies are acutely vulnerable to political events in these places and that, even if oil were plentiful in the long term, such events can create a lot of pain and disrtutpion in the short term that we are not planning for;
- it is of course more dangerous in that it hides the fact that there IS a long term problem; by focusing (in an artifically theatrical way) on short term issues, it prevents us from doing anything about the long term crisis - which is quite scary when you think that this is an industry where investment decisions commit us to infrastructure and patterns of activity for many decades.
Myth number three is that we can switch quickly to a low-carbon economy. While biofuels, wind and solar energy are growing rapidly, they comprise a tiny share - less than 2 per cent - of global energy production. Humankind remains dependent on fossil fuels and coal is the fastest-growing of all the main fuel types. Carbon emissions continue to rise. We clearly all need to work harder if we are to tackle the threat of climate change.
The usual silly argument that renewables are still small and therefore will remain so. We have not tried yet to make them big. To a large extent, renewables are still being developed against the common wisdom of the serious people and against ferocious lobbying by traditional sectors (both the coal and nuclear industry spend a lot of effort lobbying against wind) and prominent NIMBYs, and they have never been a priority of policy (there are policies in place, and they work, but they are still seen in Washington, Brussels and other capitals like London or Paris as something that you do to look green rather than because it makes sense). As I've argued many times, wind is cheap, understood, and able to provide a lot more of our energy than generally admitted, but that idea has yet to sink in, and Hayward's argument is typical of that.
Sure, coal is growing fast, but that's because policies push that way, and because policies that would make things different are dismissed and/or fought tooth and nail by industry.
So how are we to secure the energy needs of the world in the 21st century? The evidence is that where markets are allowed to operate, they do work. That is what the data in the review show. And that is the real source of hope for the future. Consumers in Europe and north America are already responding to high prices by moderating demand. They are also beginning to embrace energy efficiency. Where investment is allowed to take place, energy production responds positively. Last year, US oil and natural gas production increased - in the case of oil, for the first time since 1991.
Using the small drops in demand in the US and Europe ignores the fact noted earlier in the article, ie that demand growth is coming mostly from other countries. And it conveniently ignores the fact that the West is the only part of the world where demand could shrink (given that in many parts of the world, especially the big new consumers in Asia and oil-rich countries, energy is subsidized and consumers have yet to feel the prices hikes in full) - and it took a five-fold increase in oil prices to cut demand by a couple percent!
Pointing to a small increase in US production (why not repeat here the note and the similar hike in UK production last year?) suggests that oil production could be increased by significant amounts at home, with investment. but there are effectively no restraints on investment in the areas already opened to production, and as he noted above "the trend is downwards." Opening up new areas like ANWR or offshore for drilling would certainly create a lot of profits for the oil industry in the short term, but would be highly unlikely to reverse the production decline. and the volumes at stake are insignificant on the global scale (total US reserves, including those in all the closed off areas, are currently equal to about one year of world consumption, or 5 years of US consumption).
But pointing that things are moving (or could move) in the right direction on both the demand and supply fronts suggests that, again, the oil crisis is temporary and easily fixable.
The conclusion is therefore simple. Producers and consumers should be encouraged to respond to the market's signals. High prices are saying that we need more investment - in energy efficiency, new production, new technology and new energy sources such as wind, solar and nuclear.
Huh? High prices are the signal. What more encouragement people need? Either they respond to the signal, or they don't. That's what markets are about, isn't it?
Of course, he wants more. The solution is always more, not less. Never. and somehow wind and solar deserve a line here, despite having been dismissed as irrelevant just a paragraph above. But it's so politically correct to mention them, alongside the things we really care about: more drilling (and more nuclear too).
In order for that to happen, businesses and governments must act together. Companies know that they need to invest more, which is why BP and its peers have been raising capital expenditure substantially. But governments must do their bit too, by removing the barriers to that investment, improving access to resources and modernising the tax structures we work in.
No mention, of course, that BP's investments have been going up because its costs have been goign up, rather than because it is exploring or developing more fields. No mention of the fact that, other than the bump from adding TNK production to its own production, BP's output has been declining over the past 5 years. No mention that majors barely control a few per cent of world oil reserves and have becoming increasingly irrelevant, despite the headlines and hate they generate with their huge profits.
And a conclusion that encapsulates the spirit of our times: there is no problem, however momentous, that cannot be resolved with lower taxes (I presume that's what he means by "modernising" tax structures, right?).
After 30 years of voodoo economics, we get this sad "all is well, we'll save you if you lower our taxes" gambit and it will be seen as the height of seriousness.
But maybe this is a good thing, because this is certainly not going to slow the relentless rise of oil prices, and its very real consequences on our economies. and maybe, maybe, at that point, our politicians, keen to save their sorry asses, will stop listening to "serious" people and their unctuous, don't-rock-the-boat talk, and will actually go for policies that work.
The CEO of BP, Tony Hayward, has published, on the occasion of the publication of BP's statistical yearbook, an Op-Ed in the Financial Times with a pretty self-explicit title: Let the markets solve the energy crisis. But it's also very devious, as his ode to markets allows him to mix reasonable arguments with highly toxic ones, and it's going to be very hard to make the distinction that he is correct on some respects but not in others...
Basically his arguments boil down to 3 points: there is no speculation (prices are justified by fundamentals, markets work fine), renewable energy is not serious (too small, mostly), and there is no peak oil (plenty of reserves around). and of course, his solution is simple: oil majors are ready to invest and let market forces solve the supply problem, but political obstacles prevent them, and governments must therefore help by removing these.
What is true is that speculation is not to blame, and that there are political obstacles to investment today. The rest is not quite so true. And that mix, which I expect is deliberate, has one main subtext: "don't worry" (and don't try to move off oil).
[break]
OK, here's the text in full.
When I became BP chief executive just over a year ago, I warned that the supply and demand balance for energy was very tight. But, in common with most people, I never expected to see the oil price go quite as high, quite as rapidly, as it has in the past few months.
Ah, "most people." This could be seen as yet another indictment of the common wisdom of the "serious" people (I don't think he includes anybody else amongst "people") that pontificate day in and day out in newspapers, think tanks and industry fora and, somehow, still have more credibility than those that have forecast current events with a lot more success.
Of course, short term movements cannot be predicted easily, but long term trends, especially such momentous ones as the irresistible increase in oil prices over the past 5 years, can and have been announced by many commentators, which have been too easily dismissed.
While it's easy to crow now, a call for accountability of the pundits would still seem to be appropriate.
Unsurprisingly, with consumers and businesses everywhere facing much higher fuel costs, emotions are running high. I understand those feelings. Governments and the energy industry are urgently looking for solutions. But if we are to act sensibly, we must start with the facts. We must accept the world as it is, not as we hope for it to be.
You're fucked, and pissed off, but let me tell you how it really is not our fault!
On Wednesday, BP is launching the latest edition of the BP Statistical Review of World Energy. This is the 57th year of its existence and during that time the review has established a reputation as one of the most reliable sources for objective energy data worldwide. At times such as these it is a useful analytical tool for those both inside and outside the industry.
Yes, let's not mention that OPEC (and a few other) country reserves have not been independently verified for more than 20 years, and that BP uses official national data from these countries without questioning them. Let others quote them as authoritative, and let the lies be repeated and disseminated unquestioned.
(From an earlier Oil Drum story, using BP numbers from 2 years ago)
It also exposes some myths that need to be put to rest if we are to find the right solutions to big global problems such as energy security and climate change.
While it is welcome to see climate change mentioned, it is more interesting to note that the energy side of the equation is framed in terms of security and not in terms of scarcity. Hawyard will remain within that "safe" frame for the rest of the article.
The first myth is that high prices are caused by technical factors, such as speculation. While these factors may have an impact on the margins, the data clearly show that high prices are really caused by economic fundamentals.
Global energy demand growth in 2007 was above average for the fifth year in a row, driven by the fastest period of economic growth since the early 1970s. Demand growth is concentrated in those emerging nations that also subsidise fuel prices, such as China, India and - increasingly - the oil-producing nations themselves.
It is only natural that speculation would come near the top of issues touched upon by Hayward, given the cries we hear around the world, and while oil majors are not the main culprits (financiers enjoy that "honor"), they are not far behind. And of course, given that this is an issue where he is on strong ground (speculation is at best a distraction, at worse a scapegoat) he can score some easy points.
But he actually makes a convincing case, in line with what the IEA has stated yesterday (even if it seems to have been spinned very differently in most media outlets):
Yet energy supply has struggled to respond. Production by the Organisation of the Petroleum Exporting Countries fell by 350,000 barrels of oil a day last year. The production situation is even more challenging in the market-oriented nations of the Organisation for Economic Co-operation and Development, where many existing basins are maturing fast. In Britain, for instance, North Sea gas production recorded the world's lar-gest decline for the second year in a row, falling by 10 per cent in 2007. UK oil output rose very slightly, but this is a one-off, based on a single big new field. Production remains on a downward trend.
The last time oil prices surged to this kind of level, 30 years ago, new production from the North Sea helped bring prices down. This time, new OECD production will have to come from frontier provinces such as the Canadian oil sands, the Arctic and the deep waters of the Gulf of Mexico.
Another big impact on supply is Russia, where production has begun to decline. It is a little-known fact that, until now, the growing demand for oil from China and India in recent years has been met almost barrel for barrel by rising supply from Russia.
His diagnosis here is spot on, and it is very important that it be made by him (and the IEA) rather than only by pesky bloggers, and that it include a number of points that have yet to make it into the "common wisdom":
- demand growth is still very strong, and it is not just coming from China, it is also increasingly coming from oil-producing countries themselves;
- production is stagnating overall, and declining in a number of regions: OPEC (despite its apparently plentiful reserves, Russia and, more significantly, in regions that "we" control, like the North Sea and the US (no explanation given);
- incremental production can only come from "frontier" areas, ie expensive and low EROEI (although Hayward does not touch that concept, of course). There is no sivler bullet or quick fix like Alaska and North Sea were 30 years ago.
But given the tone used, one can guess what the stage is for: the first two bits are in the "not our fault" category (nasty countries closed to us), and the last one is in the "hey look at what we can do" (we're hre to help). And that does not fail:
Access to resources for international oil companies such as BP remains very restricted. Resource nationalism is on the rise. That is important because it is the oil majors that have some of the best technology for bringing difficult resources on-stream.
which sets the stage for the bigger point:
Myth number two is that the world is running out of hydrocarbons. Not so. The world has ample resources, with more than 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. The problems in bringing on new production are not so much below ground as above it, and not geological but political.
The standard "we're not running out of oil, it's just those pesky governments blocking us" argument, ie the claim that this is just a temporary problem that has an easy fix if a few selfish bureaucrats/nationalists could only get out of the way. This is dangerous on two levels:
- one is to think that political obstacles are minor, ie that it will be easy to force Russia or Saudi Arabia (or Venezuela or Iran or even US politicians) to open their door or the spigot. This perpetuates the narrative that other countries in the planet are here to provide us with the necessary goods or services, independently of their own priorities or needs; it conveys that their sovereignty is a fiction that we tolerate with just a bit too much patience, but that we could push out of the way if it really became necessary; more generally, it dismisses completely the notion that our economies are acutely vulnerable to political events in these places and that, even if oil were plentiful in the long term, such events can create a lot of pain and disrtutpion in the short term that we are not planning for;
- it is of course more dangerous in that it hides the fact that there IS a long term problem; by focusing (in an artifically theatrical way) on short term issues, it prevents us from doing anything about the long term crisis - which is quite scary when you think that this is an industry where investment decisions commit us to infrastructure and patterns of activity for many decades.
Myth number three is that we can switch quickly to a low-carbon economy. While biofuels, wind and solar energy are growing rapidly, they comprise a tiny share - less than 2 per cent - of global energy production. Humankind remains dependent on fossil fuels and coal is the fastest-growing of all the main fuel types. Carbon emissions continue to rise. We clearly all need to work harder if we are to tackle the threat of climate change.
The usual silly argument that renewables are still small and therefore will remain so. We have not tried yet to make them big. To a large extent, renewables are still being developed against the common wisdom of the serious people and against ferocious lobbying by traditional sectors (both the coal and nuclear industry spend a lot of effort lobbying against wind) and prominent NIMBYs, and they have never been a priority of policy (there are policies in place, and they work, but they are still seen in Washington, Brussels and other capitals like London or Paris as something that you do to look green rather than because it makes sense). As I've argued many times, wind is cheap, understood, and able to provide a lot more of our energy than generally admitted, but that idea has yet to sink in, and Hayward's argument is typical of that.
Sure, coal is growing fast, but that's because policies push that way, and because policies that would make things different are dismissed and/or fought tooth and nail by industry.
So how are we to secure the energy needs of the world in the 21st century? The evidence is that where markets are allowed to operate, they do work. That is what the data in the review show. And that is the real source of hope for the future. Consumers in Europe and north America are already responding to high prices by moderating demand. They are also beginning to embrace energy efficiency. Where investment is allowed to take place, energy production responds positively. Last year, US oil and natural gas production increased - in the case of oil, for the first time since 1991.
Using the small drops in demand in the US and Europe ignores the fact noted earlier in the article, ie that demand growth is coming mostly from other countries. And it conveniently ignores the fact that the West is the only part of the world where demand could shrink (given that in many parts of the world, especially the big new consumers in Asia and oil-rich countries, energy is subsidized and consumers have yet to feel the prices hikes in full) - and it took a five-fold increase in oil prices to cut demand by a couple percent!
Pointing to a small increase in US production (why not repeat here the note and the similar hike in UK production last year?) suggests that oil production could be increased by significant amounts at home, with investment. but there are effectively no restraints on investment in the areas already opened to production, and as he noted above "the trend is downwards." Opening up new areas like ANWR or offshore for drilling would certainly create a lot of profits for the oil industry in the short term, but would be highly unlikely to reverse the production decline. and the volumes at stake are insignificant on the global scale (total US reserves, including those in all the closed off areas, are currently equal to about one year of world consumption, or 5 years of US consumption).
But pointing that things are moving (or could move) in the right direction on both the demand and supply fronts suggests that, again, the oil crisis is temporary and easily fixable.
The conclusion is therefore simple. Producers and consumers should be encouraged to respond to the market's signals. High prices are saying that we need more investment - in energy efficiency, new production, new technology and new energy sources such as wind, solar and nuclear.
Huh? High prices are the signal. What more encouragement people need? Either they respond to the signal, or they don't. That's what markets are about, isn't it?
Of course, he wants more. The solution is always more, not less. Never. and somehow wind and solar deserve a line here, despite having been dismissed as irrelevant just a paragraph above. But it's so politically correct to mention them, alongside the things we really care about: more drilling (and more nuclear too).
In order for that to happen, businesses and governments must act together. Companies know that they need to invest more, which is why BP and its peers have been raising capital expenditure substantially. But governments must do their bit too, by removing the barriers to that investment, improving access to resources and modernising the tax structures we work in.
No mention, of course, that BP's investments have been going up because its costs have been goign up, rather than because it is exploring or developing more fields. No mention of the fact that, other than the bump from adding TNK production to its own production, BP's output has been declining over the past 5 years. No mention that majors barely control a few per cent of world oil reserves and have becoming increasingly irrelevant, despite the headlines and hate they generate with their huge profits.
And a conclusion that encapsulates the spirit of our times: there is no problem, however momentous, that cannot be resolved with lower taxes (I presume that's what he means by "modernising" tax structures, right?).
After 30 years of voodoo economics, we get this sad "all is well, we'll save you if you lower our taxes" gambit and it will be seen as the height of seriousness.
But maybe this is a good thing, because this is certainly not going to slow the relentless rise of oil prices, and its very real consequences on our economies. and maybe, maybe, at that point, our politicians, keen to save their sorry asses, will stop listening to "serious" people and their unctuous, don't-rock-the-boat talk, and will actually go for policies that work.
The CEO of BP, Tony Hayward, has published, on the occasion of the publication of BP's statistical yearbook, an Op-Ed in the Financial Times with a pretty self-explicit title: Let the markets solve the energy crisis. But it's also very devious, as his ode to markets allows him to mix reasonable arguments with highly toxic ones, and it's going to be very hard to make the distinction that he is correct on some respects but not in others...
Basically his arguments boil down to 3 points: there is no speculation (prices are justified by fundamentals, markets work fine), renewable energy is not serious (too small, mostly), and there is no peak oil (plenty of reserves around). and of course, his solution is simple: oil majors are ready to invest and let market forces solve the supply problem, but political obstacles prevent them, and governments must therefore help by removing these.
What is true is that speculation is not to blame, and that there are political obstacles to investment today. The rest is not quite so true. And that mix, which I expect is deliberate, has one main subtext: "don't worry" (and don't try to move off oil).
[break]
OK, here's the text in full.
When I became BP chief executive just over a year ago, I warned that the supply and demand balance for energy was very tight. But, in common with most people, I never expected to see the oil price go quite as high, quite as rapidly, as it has in the past few months.
Ah, "most people." This could be seen as yet another indictment of the common wisdom of the "serious" people (I don't think he includes anybody else amongst "people") that pontificate day in and day out in newspapers, think tanks and industry fora and, somehow, still have more credibility than those that have forecast current events with a lot more success.
Of course, short term movements cannot be predicted easily, but long term trends, especially such momentous ones as the irresistible increase in oil prices over the past 5 years, can and have been announced by many commentators, which have been too easily dismissed.
While it's easy to crow now, a call for accountability of the pundits would still seem to be appropriate.
Unsurprisingly, with consumers and businesses everywhere facing much higher fuel costs, emotions are running high. I understand those feelings. Governments and the energy industry are urgently looking for solutions. But if we are to act sensibly, we must start with the facts. We must accept the world as it is, not as we hope for it to be.
You're fucked, and pissed off, but let me tell you how it really is not our fault!
On Wednesday, BP is launching the latest edition of the BP Statistical Review of World Energy. This is the 57th year of its existence and during that time the review has established a reputation as one of the most reliable sources for objective energy data worldwide. At times such as these it is a useful analytical tool for those both inside and outside the industry.
Yes, let's not mention that OPEC (and a few other) country reserves have not been independently verified for more than 20 years, and that BP uses official national data from these countries without questioning them. Let others quote them as authoritative, and let the lies be repeated and disseminated unquestioned.
(From an earlier Oil Drum story, using BP numbers from 2 years ago)
It also exposes some myths that need to be put to rest if we are to find the right solutions to big global problems such as energy security and climate change.
While it is welcome to see climate change mentioned, it is more interesting to note that the energy side of the equation is framed in terms of security and not in terms of scarcity. Hawyard will remain within that "safe" frame for the rest of the article.
The first myth is that high prices are caused by technical factors, such as speculation. While these factors may have an impact on the margins, the data clearly show that high prices are really caused by economic fundamentals.
Global energy demand growth in 2007 was above average for the fifth year in a row, driven by the fastest period of economic growth since the early 1970s. Demand growth is concentrated in those emerging nations that also subsidise fuel prices, such as China, India and - increasingly - the oil-producing nations themselves.
It is only natural that speculation would come near the top of issues touched upon by Hayward, given the cries we hear around the world, and while oil majors are not the main culprits (financiers enjoy that "honor"), they are not far behind. And of course, given that this is an issue where he is on strong ground (speculation is at best a distraction, at worse a scapegoat) he can score some easy points.
But he actually makes a convincing case, in line with what the IEA has stated yesterday (even if it seems to have been spinned very differently in most media outlets):
Yet energy supply has struggled to respond. Production by the Organisation of the Petroleum Exporting Countries fell by 350,000 barrels of oil a day last year. The production situation is even more challenging in the market-oriented nations of the Organisation for Economic Co-operation and Development, where many existing basins are maturing fast. In Britain, for instance, North Sea gas production recorded the world's lar-gest decline for the second year in a row, falling by 10 per cent in 2007. UK oil output rose very slightly, but this is a one-off, based on a single big new field. Production remains on a downward trend.
The last time oil prices surged to this kind of level, 30 years ago, new production from the North Sea helped bring prices down. This time, new OECD production will have to come from frontier provinces such as the Canadian oil sands, the Arctic and the deep waters of the Gulf of Mexico.
Another big impact on supply is Russia, where production has begun to decline. It is a little-known fact that, until now, the growing demand for oil from China and India in recent years has been met almost barrel for barrel by rising supply from Russia.
His diagnosis here is spot on, and it is very important that it be made by him (and the IEA) rather than only by pesky bloggers, and that it include a number of points that have yet to make it into the "common wisdom":
- demand growth is still very strong, and it is not just coming from China, it is also increasingly coming from oil-producing countries themselves;
- production is stagnating overall, and declining in a number of regions: OPEC (despite its apparently plentiful reserves, Russia and, more significantly, in regions that "we" control, like the North Sea and the US (no explanation given);
- incremental production can only come from "frontier" areas, ie expensive and low EROEI (although Hayward does not touch that concept, of course). There is no sivler bullet or quick fix like Alaska and North Sea were 30 years ago.
But given the tone used, one can guess what the stage is for: the first two bits are in the "not our fault" category (nasty countries closed to us), and the last one is in the "hey look at what we can do" (we're hre to help). And that does not fail:
Access to resources for international oil companies such as BP remains very restricted. Resource nationalism is on the rise. That is important because it is the oil majors that have some of the best technology for bringing difficult resources on-stream.
which sets the stage for the bigger point:
Myth number two is that the world is running out of hydrocarbons. Not so. The world has ample resources, with more than 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. The problems in bringing on new production are not so much below ground as above it, and not geological but political.
The standard "we're not running out of oil, it's just those pesky governments blocking us" argument, ie the claim that this is just a temporary problem that has an easy fix if a few selfish bureaucrats/nationalists could only get out of the way. This is dangerous on two levels:
- one is to think that political obstacles are minor, ie that it will be easy to force Russia or Saudi Arabia (or Venezuela or Iran or even US politicians) to open their door or the spigot. This perpetuates the narrative that other countries in the planet are here to provide us with the necessary goods or services, independently of their own priorities or needs; it conveys that their sovereignty is a fiction that we tolerate with just a bit too much patience, but that we could push out of the way if it really became necessary; more generally, it dismisses completely the notion that our economies are acutely vulnerable to political events in these places and that, even if oil were plentiful in the long term, such events can create a lot of pain and disrtutpion in the short term that we are not planning for;
- it is of course more dangerous in that it hides the fact that there IS a long term problem; by focusing (in an artifically theatrical way) on short term issues, it prevents us from doing anything about the long term crisis - which is quite scary when you think that this is an industry where investment decisions commit us to infrastructure and patterns of activity for many decades.
Myth number three is that we can switch quickly to a low-carbon economy. While biofuels, wind and solar energy are growing rapidly, they comprise a tiny share - less than 2 per cent - of global energy production. Humankind remains dependent on fossil fuels and coal is the fastest-growing of all the main fuel types. Carbon emissions continue to rise. We clearly all need to work harder if we are to tackle the threat of climate change.
The usual silly argument that renewables are still small and therefore will remain so. We have not tried yet to make them big. To a large extent, renewables are still being developed against the common wisdom of the serious people and against ferocious lobbying by traditional sectors (both the coal and nuclear industry spend a lot of effort lobbying against wind) and prominent NIMBYs, and they have never been a priority of policy (there are policies in place, and they work, but they are still seen in Washington, Brussels and other capitals like London or Paris as something that you do to look green rather than because it makes sense). As I've argued many times, wind is cheap, understood, and able to provide a lot more of our energy than generally admitted, but that idea has yet to sink in, and Hayward's argument is typical of that.
Sure, coal is growing fast, but that's because policies push that way, and because policies that would make things different are dismissed and/or fought tooth and nail by industry.
So how are we to secure the energy needs of the world in the 21st century? The evidence is that where markets are allowed to operate, they do work. That is what the data in the review show. And that is the real source of hope for the future. Consumers in Europe and north America are already responding to high prices by moderating demand. They are also beginning to embrace energy efficiency. Where investment is allowed to take place, energy production responds positively. Last year, US oil and natural gas production increased - in the case of oil, for the first time since 1991.
Using the small drops in demand in the US and Europe ignores the fact noted earlier in the article, ie that demand growth is coming mostly from other countries. And it conveniently ignores the fact that the West is the only part of the world where demand could shrink (given that in many parts of the world, especially the big new consumers in Asia and oil-rich countries, energy is subsidized and consumers have yet to feel the prices hikes in full) - and it took a five-fold increase in oil prices to cut demand by a couple percent!
Pointing to a small increase in US production (why not repeat here the note and the similar hike in UK production last year?) suggests that oil production could be increased by significant amounts at home, with investment. but there are effectively no restraints on investment in the areas already opened to production, and as he noted above "the trend is downwards." Opening up new areas like ANWR or offshore for drilling would certainly create a lot of profits for the oil industry in the short term, but would be highly unlikely to reverse the production decline. and the volumes at stake are insignificant on the global scale (total US reserves, including those in all the closed off areas, are currently equal to about one year of world consumption, or 5 years of US consumption).
But pointing that things are moving (or could move) in the right direction on both the demand and supply fronts suggests that, again, the oil crisis is temporary and easily fixable.
The conclusion is therefore simple. Producers and consumers should be encouraged to respond to the market's signals. High prices are saying that we need more investment - in energy efficiency, new production, new technology and new energy sources such as wind, solar and nuclear.
Huh? High prices are the signal. What more encouragement people need? Either they respond to the signal, or they don't. That's what markets are about, isn't it?
Of course, he wants more. The solution is always more, not less. Never. and somehow wind and solar deserve a line here, despite having been dismissed as irrelevant just a paragraph above. But it's so politically correct to mention them, alongside the things we really care about: more drilling (and more nuclear too).
In order for that to happen, businesses and governments must act together. Companies know that they need to invest more, which is why BP and its peers have been raising capital expenditure substantially. But governments must do their bit too, by removing the barriers to that investment, improving access to resources and modernising the tax structures we work in.
No mention, of course, that BP's investments have been going up because its costs have been goign up, rather than because it is exploring or developing more fields. No mention of the fact that, other than the bump from adding TNK production to its own production, BP's output has been declining over the past 5 years. No mention that majors barely control a few per cent of world oil reserves and have becoming increasingly irrelevant, despite the headlines and hate they generate with their huge profits.
And a conclusion that encapsulates the spirit of our times: there is no problem, however momentous, that cannot be resolved with lower taxes (I presume that's what he means by "modernising" tax structures, right?).
After 30 years of voodoo economics, we get this sad "all is well, we'll save you if you lower our taxes" gambit and it will be seen as the height of seriousness.
But maybe this is a good thing, because this is certainly not going to slow the relentless rise of oil prices, and its very real consequences on our economies. and maybe, maybe, at that point, our politicians, keen to save their sorry asses, will stop listening to "serious" people and their unctuous, don't-rock-the-boat talk, and will actually go for policies that work.
Spanish lorry drivers blocking main access roads to Madrid. [break] This is a crosspost from the European Tribune.
[Update II : 12-06-2008 08h30]
A few hours ago the Portuguese government yielded, striking a deal with protesting hauliers. While taxes on diesel remain in place, a package of measures was presented by the government that includes reduced toll fares and income tax exemptions, representing a substantial subsidy to the industry. Economic activities non dependent on Spanish trade routes should go back to normal in the next 48 hours.
Meanwhile in Spain a deal has been struck with some hauliers organizations, but not with those in action. Reports of violence are increasing, pierced tires, broken wind shields, cargoes destroyed; yesterday some lorries were set in fire during the night, resulting in serious burns on at least one driver asleep inside. The Spanish government is calling for “cogent” action by police forces against the picket lines.
|
Click for more pictures of the blockade in Spain |
There are several hundred lorries stranded in Spain, many of them Portuguese. Those holding fresh cargoes are running out of fuel to maintain their goods. Speaking to the media some of the drivers stranded considered leaving their lorries on the road and simply return home by other means.
Elsewhere, Irish fishermen are suspending the blockade to the ports of Cork and Waterford. Belgian drivers are planning action against high fuel prices for the 19th and 20th of the month, considering a blockade of Brussels [hat tip Migeru].
[Update I : 11-06-2008 21h00]
Lisbon ran out of diesel during the afternoon and petrol will run out still today. Milk, vegetables and fruit are becoming very scarce in stores.
Two lorry operators have also paralysed south of the Tagus, impairing all on road assistance to motorists. Cars with engine problems are piling up on the road sides all across Alentejo and Algarve.
Farmers and fishermen were also in protest today in Spain, setting demonstrations in several cities of the country. TVE had some sad pictures to show today, with confrontations between the police and demonstrators resulting in numerous injured. At least Madrid is also feeling the same kind of shortages in supermarkets as in Lisbon; fresh meat is becoming an especially scarce product.
High oil prices are impairing one of the most important industries in Europe, road freight transport. Present diesel prices (of which about 60% are taxes) are eating the profit margins of lorry owners. Last Friday a strike started in Spain claiming for help from the government, with some 12 000 transport companies adhering.
During the weekend in Portugal lorry owners called a strike at a national meeting with the main intention of joining the announced actions by the Spanish unions. But at the same time the employed lorry driver's Union was (and still is) in negotiations with the Portuguese government. The Union called on its members to not go on strike so negotiations could continue. Feeling isolated the lorry owners transformed the strike into a blockade.
These owners are mainly small businessmen that operate with their own lorry, the big companies don't seem to be involved. Less than one fourth of the country's drivers are in the protest but the blockade is affecting most of them, the main connections to Spain have been blocked as so the major oil products storage facilities. The objective is clear: bringing the country to a halt.
In many blocking spots protesters are menacing to stone those who may try to break it. Old tyres have been set to fire at road junctions and boarder crossings.
A blockade picket in Portugal.
In Spain mobilization seems to be more deeper, yesterday several access roads to Madrid were blocked. As here, main border routes are being blocked, accumulating lorries in a kind of no man's land. In some places where bolder drivers tried to break the blockade the protesters managed to halt lorries and dumped their cargo. There are news of roads blocked also in the northern side of the Pyrenees, with French protesters mobilizing at least as far as Bordeaux.
Video from Reuters.
Yesterday things heated up between protesting drivers and those eager to deliver their cargoes. One protester was killed in Alcanena, Portugal when a driver tried to break a blockade at an important freight route. Hours later a similar situation happened in Granada, Spain when a van hit a blocking picket also killing one protester. A video digest of Tuesday's protests can be found at Euronews.
From a round on the media these are the main impacts to normal life:
- Traffic jams are affecting visibly commuter traffic in Spain with Madrid, Barcelona and Valencia being hardest hit.
- The National Guard has been escorting oil products convoys both to Madrid and Lisbon, densely populated areas that could rapidly dry out of fuel. This morning many filling stations in the northern suburbs of Lisbon had already ran out of diesel and 95 octane petrol.
- Diesel especially is becoming scarce in many filling stations all across the Peninsula. The Algarve seems to be on of the most hit regions, to where many people travelled taking the chance of an extended weekend to spend a few days in the southern warm shores.
- Many factories are closing operations for lack of supply of all varieties of goods. Car factories, an important sector in the Peninsula, are already paralysing, lacking parts to continue operations.
- Fresh goods are disappearing from the supermarket shelves. Yesterday fresh fish was already impossible to find.
- Milk will be unavailable in less than two days. Producers and storage facilities are dumping milk they can't send to the markets.
- Poultry producers are running out of feedstock. A massive die off could take place if new supplies don't arrive in the next few days
- Fuel supplies were suspended at the Lisbon airport, but up to the moment no flights have been cancelled. Air line companies have been filling their aircrafts at other airports in Oporto and Funchal.
Today other states will join the protest. Irish fishermen are set to blockade Cork's port and Scottish lorry drivers will take the road from Glasgow to Edinburgh on a slow pace, disrupting traffic in Scotland's most transited highway.
How all these actions can impact oil production in Saudi or Russia is hard to envision. Governments will either capitulate and reduce taxes (something that up to now no one seems willing to do) or recur to force and send the guard and the police against the drivers. No option is pleasant, and none will bring the international oil market back into balance.
I can't help feeling that for road transport these are the last breaths of a dying industry.
Previously at TOD:E: Post Peak Italy.
This is a Guest Post by Bob Everett. Bob is Lecturer in Renewable Energy at the Open University in Milton Keynes, UK.
Domestic energy is getting expensive, but what does that mean compared to the situation in our parents' or grandparents' days? Should we grumble?
[break]
The chart above shows domestic fuel prices for Great Britain from 1914 to 2007. The data up to 1985 was compiled by Horace Herring and Rodney Evans and been updated with more recent figures from UK government statistics. It is expressed in UK pounds for the year 2000, adjusted by the retail price index (i.e the price of energy related to other 'real' goods such as food).
At the beginning of the 20th century, Britain's fuel situation was dominated by cheap coal. In RPI terms domestic coal was a third of the price that it is today and the domestic sector consumed vast amounts of it. Town gas made from coal was about five times the price of coal. It was locked in a battle with electricity for the lighting market. This gas/coal price ratio decreased and was down to about 3:1 by the middle of the 20th century due to economies of scale and improved production techniques.
Electricity was initially staggeringly expensive. When Brighton Corporation first started producing it in 1885 they sold it at a shilling (5p) a kWh. Translated in RPI terms that is about £900/GJ in today's money, i.e. way off the top of the chart. Indeed it only gets below £80/GJ in the 1930s, around the time that the National Grid was being created. Yet it was such a desirable commodity that it sold into ordinary working class homes for lighting and appliances.
Oil for heating was not widely available before World War 2 and so doesn't enter the GB statistics. After the war it became available in larger amounts at progressively lower and lower prices and ate into the town gas heating market. However this fought back with a process to produce town gas from imported naptha rather than coal.
In RPI terms electricity prices bottomed out in the 1960s when it became cheap enough for 'all electric homes' to be considered. The bulk of electricity was generated from coal plus some nuclear power.
The oil price rises of 1973 and 1979 put paid to most of the gains of heating oil in the 1960s. North Sea natural gas came to the rescue. The whole country was converted from town gas and it was priced to be competitive with coal. Effectively it wiped out the oil and coal heating markets and much of the rising electric heating market. Britain became a nation of homes with gas-fired central heating. In the 1990s even the power stations started to burn gas rather than coal.
We can also look at this price history through 'earnings deflated' prices (above). As per capita GDP and earnings have increased so an 'average wage' has been able to purchase more and more energy. This has the effect of 'tilting' the whole price curve making energy look even cheaper today than it has been in the past. So although the price of electricity in 1960 was not that much different to today's price in 'real' terms (i.e.in the equivalent number of loaves of bread or eggs), the average wage can afford to buy over twice as much electricity.
It is also noticeable that the 'earnings deflated' price of coal is amazingly flat over the whole of the 20th century. I suspect that this is because the price was mainly determined by the wages of the miners.
But now things are going awry. In RPI terms all of the fuel prices have risen since 2000. GDP and earnings are still going up, but apparently not fast enough to deflate away the fuel price rises. Domestic energy is now set to consume an increasing proportion of the household budget. In 2000 'fuel and power' made up 3.3% of the UK household expenditure. However, this is a long way short of the peak of over 6% in the mid-1960s. If you go back a really long way a budget study of a 1760s Berkshire family estimated that it took 1% of their income just to buy two candles a day.
I'm not sure where the road forward (to the Olduvai Gorge?) will take us. But surely if we're all so much richer than we were in the past (through the magic of economic growth) we should be able to afford decent insulated homes and a genuinely sustainable energy system.
Further reading: Olduvai Revisited 2008
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