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July 21, 2006

1500 Days Peak Oil

ASPO, the Association for the Study of Peak Oil and Gas, is holding its annual conference. Here's an account of remarks by Chris Skrebowski, editor of Petroleum Review, former editor of Petroleum Economics. Skrebowski used to argue against Peak Oil. No longer. From the ASPO-5 blog:

"We have 1,500 days until peak and tomorrow we'll have one day less," Chris Skrebowski, the editor of Petroleum Review, told the ASPO-5 crowd today. Skrebowski's projections, which focus on oil flows instead of reserves, has the world peaking at between 92 and 94 million barrels per day. Unfortunately, he said, "collectively we're still in denial."

It's a tricky job to work up reliable projections, Skrebowski explained. "Decoding IEA statistics is like decoding the Da Vinci code." Complicating the matter is the overwhelming tendency among industry and government officials to propagate optimistic scenarios. "We've deceived ourselves, albeit with good intentions, but with disastrous results." The key he said is to examine what oil producers "are doing, not what the chairmen and CEOs are saying."

Skrebowski said the idea of peak oil is straightforward: "It's real, it's imminent and it's going to be unpleasant." Known for his detailed "Megaprojects" report that looks at new oil fields coming on line, Skrebowski emphasized the importance of focusing on oil "flows" rather than underground stocks or reserves. "If you go down to fill up your car and were told to come back six hours later — or a month later — you get a sense for the problem. Reserves are only important when we can turn them into flows. Otherwise they are just an academic concept. The fact that huge amounts can be produced over time doesn't mean it can meet the flow needs today."

Skrebowski joins a growing group that sees the peak occurring earlier than later. "It can't be far off," he said. And the consequences couldn't be more profound. "We've built are entire society around oil. Everything depends on cheap and plentiful oil. We will have to change everything we do."

The massive jump of oil prices since 2002 corroborates the emerging reality of tightening supplies, Skrebowski said. "What is the price telling us? Desperately it's saying 'send us more oil.' That's what economics does."

But new supplies aren't coming forth, he said. Nor is demand being appreciatively destroyed. "Neither is working. New supplies are not coming on line and demand is not falling, with the exception of the third world, which is getting priced out of the market. It just hasn't hit us yet."

Ultimately, though, demand destruction will hit the industrial economies because hopes for boosting production are long gone. "We're not finding it fast enough, the fields are old and weary, we've fired too many people in the industry, and costs are going through the roof," he said. [...]

He dismisses optimistic projections from organizations such as Cambridge Energy Associates (CERA) as "utter tosh."

Skrebowski says that mitigation efforts won't affect the peak date by much — a few months or a year at the most. Oil-producing countries, for example, could decide to divert more supplies to domestic consumption, tightening the price noose on industrialized nations. "It's an exquisite form of torturing us." And the result could lead to an interesting sight: "SUVs on the streets of Mexico and Smart Cars in Houston." [Emphasis added]

Skrebowski's point about flows is crucial. All the reserves in the world won't do you any good if you can't get it out of the ground fast enough. That's the mistake the people who think Canadian oil sands will save us make.

1500 days is not a lot of time. Tomorrow it'll be one day less. There's nothing that can happen in that kind of time frame that will postpone peak enough to matter. We can't postpone peak, but we can mitigate the post-peak impact. We need to do what we can. We'll be living in a post-peak world for a long, long time.

We have a choice to make. We can fight over the oil that's left; we can sell it to the highest bidder; or the nations of the world can voluntarily agree to reduce consumption by at least the worldwide depletion rate, roughly 2.5% per year. The latter approach is called the Oil Depletion Protocol. More on that in a future post.

Posted by Jonathan at July 21, 2006 12:33 AM  del.icio.us digg NewsVine Reddit YahooMyWeb

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