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The View from the Peak and a Strategy for Descent: A Report from the ASPO-USA Conference in Houston

What is Peak Oil?. Peak Oil will occur when the global production of oil peaks and begins an inevitable decline.The real energy crisis begins not when the world runs out of oil, but when global production begins an inexorable decline. . What is Peak Oil? (cont.). In 1956, M. King Hubbert, a Shell O

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The View from the Peak and a Strategy for Descent: A Report from the ASPO-USA Conference in Houston

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    1. The View from the Peak and a Strategy for Descent: A Report from the ASPO-USA Conference in Houston Think Global – Act Local The Capital Region Energy Forum December 10, 2007 Bill Reinhardt New York State Energy Research & Development Authority (NYSERDA)

    2. What is Peak Oil? Peak Oil will occur when the global production of oil peaks and begins an inevitable decline. The real energy crisis begins not when the world runs out of oil, but when global production begins an inexorable decline.

    3. What is Peak Oil? (cont.) In 1956, M. King Hubbert, a Shell Oil geologist, predicted that Peak Oil for the US would occur in the 70’s, and it did, in 1970. US discoveries had peaked in the 30’s. Both discoveries and production were plotted as Bell Curves, with the production curve lagging by about 35 years.

    4. United States Peak and Decline

    5. What is Peak Oil? (cont.) Global discovery of oil peaked in 1964. When will Peak Oil arrive? T Boone Pickens (Texas oilman), “The peak is now”. Kenneth Deffeyes, (Petroleum geologist and Princeton professor) – Thanksgiving 2005 Uppsala Hydrocarbon Depletion Study Group - 2008 US Energy Information Agency - 2037

    6. What is Peak Oil? (cont.) Global demand is currently 87 million bbl/day (4Q, 2007) and rising, especially in China, India, the US, Russia and OPEC. 3.4% growth in 2004. 2.7% in 2005 2.2% projected 2007-2011 (IEA, 2007). Up from 2.0% projection. Demand in developing world may accelerate.

    7. What is Peak Oil? (cont.) The stress on global production capacity has caused the recent volatility in world oil prices, and OPEC target price range has jumped from 22 -28 $/bbl to 60-70 $/bbl or is it 90–100 $/bbl? OPEC at full production in early 2006. Cuts in late 2006 to protect price range. By late 2007, demand exceeds production. A peaker’s bluff? Geopolitical instability (the curse of oil). In 2006, up to 54 of 65 largest producing countries have passed their peak. When Non-OPEC production peaks, what can OPEC (Saudi Arabia) do?

    8. Conventional Oil Peaked in 2004 From now on, depletion will outweigh new supply of conventional oil 3% annual depletion Unconventional oil must meet global demand growth and net depletion Unconventional oil will be primarily deepwater oil (now) and tar sands (after 2009) Future capital costs and oil prices will continue upward trend of last five years (CIBC World Markets, December 2006)

    9. The Peaking of World Production?

    10. When will all Liquid Fuels Peak? Chris Skrebowski, Editor, Petroleum Review Supply will remain tight and prices high barring a major economic setback Oil supply will peak no later than 2010/2011 at around 92-94 million b/d Oil supply in international trade may peak earlier than oil production peak Collectively we are still in denial (ASPO Houston, 2007)

    11. What is Peak Oil? (cont.) What are the implications of Peak Oil? - National Security: Most future oil and gas is in the volatile Middle East.1 - Economic: Stagflation and $100/bbl for oil (if you can get it!).2 - International Relations: Resource wars (the winner gets it!).3 1. PFC Energy, September 2004 2. Douglas-Westwood Limited, May 2004) 3. The Nation, November 8, 2004. “Crude Awakening” by Michael T. Klare

    12. Oil and Gas Combined Peak

    13. ASPO-USA 2007 Houston World Oil Conference Supply Side Issues Beyond Geology Reserve Growth Infrastructure Constraints Geopolitical Constraints on Investment Geopolitical Instability-Resource Wars Resource Nationalism and Peak Exports

    14. ASPO-USA 2007 Houston World Oil Conference Demand Side Response Unconventional Oil Biofuels Demand Destruction Energy Efficiency Technology Lifestyle Change: Wants versus Needs

    15. Supply Side: Reserve Growth Petro-optimists overestimate potential based on best case fields Sometimes, enhanced oil recovery leads to more rapid decline in field Sometimes, fields are drained faster Historically (e.g., Alaska) Reserve Growth occurs long after the peaking of a region.

    16. Supply Side: Infrastructure Constraints Oil and gas infrastructure is rusty and too old Oil service and drilling rigs too old Refineries, tank-farms and pipelines too old Industry’s work-force rapidly graying Source: Matthew R. Simmons

    17. Supply Side: Geopolitical Constraints on Investment Investable Resources are limited by rise of National Oil Companies (NOCs) and fall of International Oil Companies (IOCs) Geopolitical instability further limits investment (e.g., Middle East) even when access is there Sources: Hirsch, Simmons, Skrebowski, Petrie

    18. Supply Side: Geopolitical Instability Resource Wars Numerous examples of armed conflict disrupting existing supply: In the past – Iran, Iraq, Kuwait, Venezuela In the present – Iraq, Mexico, Colombia, Nigeria, Chad, Sudan In the future – Iraq, Iran…??? OK, probably not Norway

    19. Supply Side: Resource Nationalism and Peak Exports This trend is happening across OPEC as well as Russia and Canada Peak Exports predicted to occur even before a global production peak and may have already begun in 2006-2007 “Oil-Rich Nations Use More Energy, Cutting Exports” (NYT 12/9/07, p.1) Sources: Hirsch, Skrebowski, Petrie, Brown & Foucher (Export Land Model)

    20. Rising Consumption = Declining Exports

    21. What About Saudi Arabia?

    22. What Is Left For Export?

    23. Not what the EIA and IEA had in mind!

    24. Top Five = KSA, Russia, Norway, Iran, and UAE

    25. Peak Exports Has Begun

    26. Demand Side Response: Unconventional Oil Canadian Tar Sands constraints Projection reduced to 2.8 MBD by 2015 from 3.0 MBD, due to massive cost increases and labor shortages (40-50% over 2 years) (Toronto Star, 11/16/07) Emissions, natural gas and water constraints In-situ processing may mitigate water, land and air disruptions Scale factor Timing issue: Will impact slope of decline

    27. Demand Side Response: Biofuels Biofuel constraints Food versus fuel Scale factor Timing issue: Will impact slope of decline

    28. Demand Side Response: Demand Destruction Involuntary demand destruction is happening in third world now Supply and demand will diverge noticeably by 2009 Supply shortfalls (for heating oil) in Winter before 2011 Source: Skrebowski

    29. Demand Side Response: Demand Destruction (cont.) Aviation Case Study Aviation demand has grown (fast) with rising GDP, business revenue and disposable income The reverse is also true. It is the peak-oil induced economic effects that will do the greatest damage to the aviation industry (and others) Current aviation forecasts are unrealistic Implications are dire for aviation and all travel dependent industries The critical factor is GDP, not cost of service Governments should stress transportation efficiency and enhanced fuel efficiency standards for all modes of transportation Source: Bezdek

    30. Demand Side Response: Energy Efficiency Technology Key efficiency targets are transportation and building heating Major time lag for impact to build (<5MBD over 20 years) Can mitigation overtake oil decline? Will depend on real (unknown) depletion rate of 2-5% per year and exporter withholding % world oil shortage ~ % decline in world GDP Key Question: Can energy efficiency technology change relationship between GDP and energy? Source: Hirsch

    31. Demand Side Response: Lifestyle Change-Wants versus Needs One way or another, demand will equal supply Voluntary lifestyle changes less disruptive to self and society than involuntary demand destruction Lifestyle changes encompass where you live, how and where you travel, and your consumption choices. Wants are unlimited, needs are not

    32. Other Recent Peak Oil Studies US Army Corps of Engineers (September 2005) Energy Trends and Their Implications for U.S. Army Installations “The US economy uses 50% more energy per unit of GDP than the other developed nations of the world (EIA 2004). The fossil fuel-based, automobile-centered, throw-away economy is not a viable model for the United States or the rest of the world over the long term. It is not sustainable. (p.53)” “This disproportionate [US] consumption of energy relative to global consumption causes loss of the world’s good will….A more equitable distribution of resources is in our best interest for a peaceful future. (p. iv)”

    33. Searching for Sustainability Descending the Oil Peak: Navigating the Transition from Oil Portland Peak Oil Task Force Report Focus on Long-Term Transition not Sudden Oil Shocks or Societal Collapse Task Force Process: Questions > Impacts > Recommendations

    34. Portland Peak Oil Task Force Recommendations #1: Reduce oil and Gas use 50% in 25 years #2: Inform Citizens #3: Engage Civic Leadership #4: Land Use Patterns #5: Smart Infrastructure Investment #6: Encourage Efficient & Renewable Transport Choices

    35. Portland Peak Oil Task Force Recommendations (cont.) #7: Expand Energy Efficiency Programs #8: Preserve Local Food Production Capability #9: Promote Sustainable Business Opportunities #10: Preserve Safety Net, Protect Vulnerable Populations #11: Emergency Planning

    36. How Can New York State Prepare for Peak Oil? Understand new economic trends resulting from Peak Oil (very high energy prices). Adopt an Oil Depletion Protocol. Develop State/local initiatives to limit future oil and gas demand Implications of land use development patterns for building and transportation energy demand Regionalization of building practices, manufacturing and food production.

    37. Three Principles of Industrial Relocalization Meet essential needs (food, shelter and others) as locally as possible, taking into account bio-regional strengths and weaknesses. Minimize transport of higher volume, lower-cost goods and commodities. Focus global trade on low-volume, high- cost specialist technology that facilitates local production of essential high-volume, low-cost goods and commodities. (“Think Globally, Manufacture Locally” Josh Floyd. July, 2007)

    38. Conclusions Peak Oil will bring considerable change to the New York State economy. New growth industries can help mitigate job losses brought on by structural shifts. Mitigation efforts should begin at least 15 years before the onset of Peak Oil. Most projections of Peak Oil are before 2020, and we may have passed it already! As is often true in life, denial will only make things worse.

    39. Related Web Links www.aspo-usa.com www.energybulletin.net www.theoildrum.org www.museletter.com www.oildepletionprotocol.net www.postcarbon.org www.energypreparedness.net www.peakoilnyc.org www.willitseconomiclocalization.org

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