Custodian of the Two Holy Mosques King Abdullah yesterday emphasised the importance of keeping part of the Kingdom’s natural resources for the welfare of future generations. “When new discoveries were made, I told them ‘leave them in the ground because our children and grandchildren will need them’,” the Saudi Press Agency quoted the King as saying.
… During the meeting, King Abdullah highlighted the significance of oil revenue and said that as long as there is oil, the Kingdom would not experience economic problems. “I told them once, ‘may God give it long life’… they asked me what is that… I told them petrol. As long as petrol is there, we will remain well. Our country will not have any problems,” he said.
“Saudi King says keeping some oil finds for future“, Reuters (13 April 2008) — Excerpt, with background information:
… OPEC held production steady at meetings in February and March despite calls for more oil from the U.S. and other consumers. OPEC officials blame the high price on factors beyond the group’s control such as the weak dollar, investment flows into commodities and speculation. Saudi Oil Minister Ali al-Naimi said last week that global oil markets were well supplied and there was no need to put more oil on the market, despite prices hitting a record of over $112 a barrel last week.
… Saudi Arabia has trimmed its output to around 9 million bpd to reflect lower customer demand, a Saudi oil source said on Friday. The kingdom had in previous months pumped around 9.2 million bpd. Crude demand traditionally dips at this time of year after the end of winter as refiners carry out maintenance and prepare to meet summer demand.
Saudi production capacity stands at around 11.3 million bpd, and is scheduled to rise to 12. 5 million bpd next year.
This is political peaking, perhaps the most dangerous form of Peak Oil — rapid onset, little warning, and no easy technological fixes. This is the equivalent to the assassination on 28 June 1914 of Archduke Franz Ferdinand, heir to the Austro-Hungarian throne. Both were small steps in a long historical process.
- The tensions leading to WWI had built over decades, and this was the spark that set off the conflageration.
- The leaders of Saudi Arabia have hinted about Political Peaking for several years; now they have explicitly stated it will happen.
Both of these are small events marking the start of countdowns to world-historic events.
Note: this was not totally unrecognized. The Association for Peak Oil (ASPO-US) immediately noted this (see here), as did many in the Peak Oil and energy industry. As did some astute geopolitical observes, such as John Robb.
What about the giant finds offshore of Brazil, Albert’s oil sands, and American’s oil shale?
The new “giant” fields off Brazil are rumors. Many fields “discovered” with one or two wells never played out. Even if true, this oil lies under 2 – 3 kilometers of water — and roughly 3 kilometers of salt and another kilometer of rock (that’s the upper layer, then you drill another few kilometers). This is on the outer edge of current technology. It will take years to verify the find, drill, and install production equipment. (see update #3 below)
There is a more important aspect. For conventional fields recoverable resources are the most important factor. No so for unconventional energy petroleum resources. Many of these have large reserves, such as those under the deep seas, in the polar regions, Venezuela’s heavy oil, Alberta’s bitumen (aka oil sands), and US kerogen (aka oil shale). For them the key questions concern the maximum feasible output flows and the cost of production.
These tend to require large up-front capital costs, have high costs of operation, and large environmental impacts. As a result, producing large flows is difficult. For example, by 2020 Canada’s bitumen mining *might* produce 5 million barrels/day — after tens of billions of capital costs, with incalculable costs to Alberta’s environment (much of it will look like the moon). Even that assumes sufficient water and natural gas inputs, both of which might be insufficient (nukes have been suggested as alternatives to the nat gas). But 5 million barrels/day will not offset the depletion of other N. American fields, let alone replace the peaking of the world’s supergiant fields – like Cantarell in Mexico, Burgan in Kurwait, or Gwahir in Saudi Arabia.
To understand Political Peaking – why, who, how — see The most dangerous form of Peak Oil. I strongly recommend reading it, perhaps the most important of the 177 posts on this site.
Or just wait. Your newspapers will discuss it, eventually.
Welcome Instapundit readers! Current developments make his post on 12 April look spot on; Malcom Forbe’s advice look like genius! Not that we be the only ones with oil, but the oil we have will be of far greater value.
Complaints about the drilling bans in ANWR and offshore are a staple of right-wing talk radio. But I remember Malcolm S. Forbes, back in the 1970s, saying that we should drill as little domestic oil as possible. Pump the Arabs’ oil as long as it lasts, then — when oil has become really scarce and valuable — we’ll be the only ones with any left!
The comments discuss things covered in previous posts about Peak Oil. Especially the “things will work out eventually” view. How true, but how irresponsible. The risk is not amegeddon (Peak Oil is not WWIII), but rather one to three decades of severe economic pain. The Hirsch “Mitigations” report shows that adaptation to Peak Oil will take at least two decades, and we have not yet started.
Two quotes make this point even better. First, was Keynes thinking about Peak Oil when he wrote this?
But this *long run* is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again. “A Tract on Monetary Reform” John Maynard Keynes (1923)
Peak Oil is like a hostile army approaching us. How will we react to the danger?
With the enemy’s approach to Moscow the Moscovites’ view of their situation did not grow more serious but on the contrary became even more frivolous, as always happens with people who see a great danger approaching. At the approach of danger there are always two voices that speak with equal power in the human soul: one very reasonably tells a man to consider the nature of the danger and the means of escaping it; the other, still more reasonably, says that it is too depressing and painful to think of the danger since it is not in man’s power to foresee everything and avert the general course of events, and it is therefore better to disregard what is painful till it comes, and to think about what is pleasant.
In solitude a man generally listens to the first voice, but in society to the second. So it was now with the inhabitants of Moscow. It was long since people had been as gay in Moscow as that year.
From War and Peace, Leo Tolstoy
Here is an article describing the technical challenges involved: “Brazil Oil Trapped by 500-Degree Heat, Salt Barrier“, Bloomberg (28 April 2008) — Excerpt:
Pumping oil from the Brazilian finds, parts of which are 32,000 feet (10,000 meters) below the ocean’s surface, will require boring almost twice as far down as the world’s deepest producing offshore well. … Similar drilling by Exxon and Chevron Corp. in the Gulf of Mexico cost $180 million to $200 million for each well. … Exxon Mobil abandoned a Gulf project that would have been the deepest well after pressure and heat shut down the venture in August 2006.
Confirmation and follow-up to King Abdullah’s statement from Saudi Oil Minister Ali Naimi: “Saudi Aramco fuels national spending”, Petroleum Argus (21 April 2008) — Excerpt:
“All the latest projections, at least up to 2020, do not require anything higher” than the existing capacity target, oil minister Ali Naimi tells Argus. “Unless we see really genuine demand, we have to pause right now and see what happens,” he says.
Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
Other posts about Peak Oil
- When will global oil production peak? Here is the answer!
- More answers about Peak Oil! (or just better phrased questions)
- Peak Oil, part 3: discussing the solutions
- Links to articles and presentations of some A-team energy experts
- Myths about Peak Oil – part I: There are not enough petro-engineers!
- Good news about Global Oil Production!
- More good news about Peak Oil, on the demand side
- The most dangerous form of Peak Oil
- The three forms of Peak Oil (let’s hope for the benign form)
- The world changed last week, with no headlines to mark the news
Originally posted in Fabius Maximus and reproduced here with the author’s permission.