Simmons, oil…just the beginning
For those of us concerned about dwindling resources, Leanan over at The Oil Drum includes in his weekly roundup of news a Matt Simmons article.
In an email exchange, a friend of mine ask me to comment on Stratfor’s prediction. At first, I merely brushed Stratfor’s predictions off. After all, in 2005 it predicted $30 oil–and deep trouble for China.
Well, prices have continued to climb–and China is the world’s boom-town.
Simmons makes the case against Stratfor, putting the arguments succinctly:
- Oil production has not exceeded that of May 2005.
- Energy demand is increasing. The boom town must be fed.
- Natural gas will not meet rising energy needs.
- Bio-fuels, synthetic oils, etc are, at best, stop-gap measures.
What is left is the slow liquidation of present oil stocks, the size of which we simply do not know. Simmons discussion of this issue is well worth reading.
In short, we may be ignoring the obvious if we base our production predictions on simply geo-political events.
As far as the Canadian oil sands is concerned, that tap will not be large enough to supply increasing demand.
And what about the shale oil reserves in Wyoming, Colorado, and Utah? They are vast. Jim Hamilton at Econobrowser provided a good overview of the problems with shale.
What about the argument that there is plenty of oil yet to be discovered? It is hard to argue a negative, i.e., that there are no more great deposits. Geologists know the rock formations that hide oil. Certainly, if there were other great deposits, they would now know where to look.
For the sake of argument, let us suppose there are great, undiscovered deposits. Can they be tapped quickly enough to meet rising needs? I think not. The lead time to developing a field is too long.
What about demand destruction? After all, oil is now within reach of the real cost of oil during the 1970’s crisis. Certainly there will be demand destruction if the price continues its slow climb. But what will be the economic aftershocks of such a continued climb? Think here of not only of the U.S. but of the world.
Will coal make up the difference?–after all coal-burning plants are being constructed weekly. Who wants them? We are still some distance from “clean” coal. Already, we filling the air with CO2 and other pollutants. Want to join the Chinese in wearing gas masks to work, as you peddle or walk through the fumes? Climate change and pollution proceeds apace, even as we struggle with our energy needs and an economic crisis that grows more certain every day.
We seem to be approaching the proverbial perfect storm: Growing energy needs, questionable energy stop-gaps, rising alarm about pollution and climate change, and a growing crisis in trust among financial instutitions. How many of these balls can we keep in the air at one time? We could, of course, toss in a number of other balls, which occasionally gain attention now and then: Potable water, for example. Water tables are dropping. Poyang, China’s largest fresh water lake, and the Great Lakes themselves are poised to hit all-time lows. And what about bio-diversity?
It is important to see all these issues as interconnected. Economists look and argue about their slice of the world: Climatologists, theirs….and so on round the table. Those who argue the world is unchanging and safe, keep their foot on the brake. And so, we stall and stutter forwards and backwards.
At some in the near future, worried experts everywhere should join forces and expertize, insisting that we address these issues as they should be addressed: Interconneted.