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The Second Great Depression ≈ Causes & Responses. by Colin Campbell ASPO IRELAND. Outline. 1. Geological Reality “You have to find it first” 2. Discovery & Production starts & ends growth is followed by decline 3. Explanation of Confusion 4. Consequences 5. Reactions.
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The Second Great Depression≈Causes & Responses by Colin Campbell ASPO IRELAND
Outline 1. Geological Reality “You have to find it first” 2. Discovery & Production starts & ends • growth is followed by decline 3. Explanation of Confusion 4. Consequences 5. Reactions
Extreme Global Warming gave excessive Algal Growths 90 & 150 million years ago Rifts formed as the Continents moved apart Organic debris
And then came the rains Rifts filled by sediment washed in from borderlands Chemical reactions converted organic debris into oil when buried & heated
N.W EuropeOil GeneratingZones-Where oil is and where it is not
Water well Critical Temperature 60-120 0C
Depletion is Easy to Grasp As every beer drinker knows: “Glass starts full, and ends empty” • The quicker you drink it, the sooner it is gone • The same principle applies to oil and gas How has this self-evident reality been concealed ? • It is so obviousyet it is a DEVASTATING REALISATION
A Fixed Quantity Oil was formed in the geological past • We can’t “grow” more Are we Running Out? • We started running out with the first barrel • The last barrel is far in the future But production begins to decline when half is gone - THAT IS THE ISSUE
Why we need to know Oil & Gas now dominate our lives 40% of traded energy is oil >90% transport fuel is oil • Trade depends on transport Much electricity is made from gas Critical for agriculture - people eat • Fuels the tractor, transports the produce • Gives synthetic nutrients and pesticides
Why were n’t we told? Oil companies reported Commercial Reserves to meet strict Stock Exchange rules They under-reported discovery & revised upwards • A comforting but misleading image of steady growth • No conspiracy - just simple commercial prudence OPEC over-reported PUBLIC NUMBERS ARE VERY UNRELIABLE • and difficult to decode
What the oil companies say Denial gives way to Confession Exxon-Mobil publishes the true position Chevron-Texaco speaks of “inflection” Shell’s admission causes financial furore • Failed to obscure reality by merger But Lord Browne of BP deliberately misleads • Reserve/Production ratio
OPEC Reserve Reporting Competing for Quota Kuwait 1984 Produced = 23 Gb Remaining = 64 Found = 87 (~90)
Reality and Illusion Illusion Reality Inflexion due to falling Discovery Actual As Reported
A few Examples The same pattern everywhere • but for minor variants Production mirrors discovery
US-48 Peak to Peak 40 years Peak Discovery
Egypt Peak to Peak 30 years
Indonesia Peak to Peak 32 years
Russia Peak to Peak 27 years
China Peak to Peak 44 years
United Kingdom Peak to Peak 25 years
United Kingdom Published by Dept. of Trade & Industry
Real Discovery Trend Past discovery by ExxonMobil Historical Data ExxonMobil
“Draining the tanks” 145 Yet-to-Find Surprise Filling at 5 p.a ? 945 Produced 1705 DISCOVERED 760 Remaining Total would fill Lake Geneva Emptying at 25 p.a. Billion barrels One in - Five out
All Oil & Gas All boundaries fuzzy
The Illusion of new Technology Oil industry uses very advanced technology • No major breakthrough in sight Technology holds production higher for longer • increasing profit • accelerating depletion • Does not add Reserves • save in special cases
1977 Internal Estimate : 12.5-15 Gb Reported : 9 Gb Technology added nothing Prudhoe Bay 1989 1977
First Half of Oil Age Oil Age is a Single Cycle First half lasted 150 years, stimulating great expansion of : • Industry • Transport & trade • Agriculture • Population • Financial Capital GE = GE Growing Energy equals Growing Economy
Financial Capital Banks created money out of thin air • by lending more than they had on deposit • Collateral was confidence in expansion • fuelled by cheap oil-based energy Prime benefit of Empire was financial rent Previously British £ : now US $ Cause of wars
Population ? First Oil Well Equally depicts “Financial Capital” from oil-based energy
Dawn of Second Half of Oil Age World enters Uncharted Waters • Oil Price Shocks & Economic Recessions Destruction of Capital to match energy supply We face the “End of Economics” • Resource limits anathema to classical flat-earth economists living in past • But new economic thinking emerges • The banks begin to understand
Price Shocks - the first signs Five times what it costs to produce Shocks as production capacity limits breached But prices crash with recessions
The Second Great Depression CE = CE Contracting Energy equals Contracting Economy Past debt losing its collateral • heralding an unprecedented collapse of the Financial System • USA - technically bankrupt
Survival Strategies. 1- Inform Stop giving false advice • The IEA has been a political curtain behind which its member governments hid • But is now forced to change its tune Provide valid public information “Put your trust in the People” said Winston Churchill
2- Depletion Protocol Cut oil imports to match world Depletion Rate. • World price would moderate • allowing poor countries to buy minimal needs • avoiding profiteering by oil companies & M.East • Force consumers to face reality Proposal gaining momentum : to be discussed • in Lisbon in May by senior politicians and • in Rimini in October by “World Leaders” Let this be the prime message from this talk.
3- Stop waste: many easy steps • Domestic & commercial Energy Audits Variable charges to reward savings & penalise waste A new “energy currency” (Proposed by Prof. Slessor) • Better insulation & industrial heat recovery • Heat pumps & modern light bulbs Disallow energy costs as a charge against tax • Stop tax-free aviation fuel More public transport : car pooling, hitch-hiking New behaviour & attitude
4- Turn to Renewables A solar collector on every roof Capture massive tidal and wave energy Wind-power and hydro-power Fuel crops (supplies 30% in Brasil) Geothermal Re-assess nuclear energy New small fail-safe plants
But……….. Economic Recession suppresses oil demand Oil prices sensitive to small imbalances • may crash too Unconventional Oil and Renewable Energy do not compete with cheap oil An added argument for the Protocol to make sure they are competitive
Silver Linings A new regionalism with local markets New attitudes : non-consumeristic society People learn to live in better harmony with • themselves • each other • the Environment in which Nature has ordained them to live But the transition will be tough
Thank You and Good Luck