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Scoop Link: Mbendi.co.za - Crude Oil Now Declining

World: Oil And Gas Industry - Peak Oil: an Outlook on Crude Oil Depletion - C.J.Campbell - Revised February 2002

(See http://www.mbendi.co.za/indy/oilg/p0070.htm#27 for the full article.

For related information, see http://www.runningonempty.org/OilCrash.htm)

"This paper was first presented by MBendi in October 2000, just before the end of a cycle of rising prices and dwindling capacity. It recognised the resource constraints and presented a scenario of the natural consequences, foreseeing soaring prices, imminent shortage and recession. While this general picture remains valid in resource terms, events did not unfold as expected but took a different turn. The limits to production capacity were indeed reached at the end of 2000 and prices did soar, but the economy reacted more quickly than expected by plunging the world into recession, which cut oil demand and reduced pressure on prices, which have remained weak.

Most of the points made in the paper remain valid, but an update of the study to incorporate the latest data and new understandings does call for some revision. A new scenario is proposed. The paper has been revised to better reflect current understanding.

Introduction

“This paper is about Peak Oil. It truly is a turning point for Mankind, which will affect everyone, although some more than others. Those countries, which plan and prepare, will survive better than those that do not. It is a large and difficult subject, but the essentials are clear."

…big snip

…Background, Understanding the Data, Depletion, Facing the Future, New Scenario….

big snip…

Conclusion

“Some general comments may be offered in conclusion, starting with oil price.

Oil outside the Middle East peaked in 1997, as was easily foreseen. It should have heralded a gradual rise in price from growing Middle East control. But instead there was an anomalous fall. Price collapsed in 1998 because of the interaction of warm weather, an Asian recession, the devaluation of the ruble, events in Iraq, false supply estimates by the IEA that prompted higher OPEC production and perhaps some manipulation by insiders. Then, prices surged through 1999 in a staggering 300% increase, as the underlying capacity limits were breached, triggering recession. Demand fell and prices slumped.

Spare capacity can mean many things. A closed flowing well is the only form of spare capacity that can be restored at will. All the other elements take investment, work and, above all, time to deliver. OPEC had very little operational spare capacity, having to run ever faster to stand still, as it desperately tried to offset the natural decline of its ageing fields. It will be hard pressed to meet the demands made upon it even to maintain current world production, never mind growth.

We may look back and find that the year 2000 was the peak: a turning point when the prosperity of the past, driven by an abundant supply of cheap oil-based energy, gave way to decline in the future. A discontinuity of this magnitude is hard to grasp. The poor countries of the world will bear most of the burden. But the United States will be in serious difficulties.

There is a danger of some ill-considered military intervention to try to secure oil, of which the Afghan War may have been a foretaste. That affair may be seen to have been more of an act of defiance to impose global economic hegemony by military means than a calculated action to reduce the level of so-called terrorism. The growing population pressures from declining wealth are manifested in new migration trends as are already being felt in Europe and the United States with human smuggling becoming a gruesome addition to the global market.

As global order disintegrates, self-sufficiency at the local level may become a priority for survival.

An oil crisis is bad for politicians. Blaming OPEC or the oil companies will not wash much longer. It would be better to make a proper analysis of the true position and inform the people at large. No one blames the government for an earthquake. So they wouldn't blame it for an oil crisis either, if they realised it was a natural phenomenon.

‘If you don't deal with reality, reality will deal with you’

But let us not be too alarmist. The roof does not fall in at peak. What changes are people's perceptions, as they come to realise that the growth of the past is set to become the decline of the future. It may herald the end of the US economic and cultural hegemony - which some people might think was no bad thing. Climate concerns may recede as the emissions, held responsible for change, dwindle. In the face of these pressures, we should use our current high oil supply intelligently while it lasts to ease the transition. For example, much more efficient vehicles have already been designed, awaiting only a mass market to be introduced.

More could be done to penalise the wasteful use of energy.

Peak oil is a turning point for Mankind, when a hundred years of easy growth ends. The population may be about to peak too for not unrelated reasons. The transition to decline is a period of great tension when priorities shift to self-sufficiency and sustainability. It may end up a better world, freed from the widespread gross excesses of to-day."

ENDS

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