A conference sponsored by a US military official convened experts in Washington DC and London warning that continued dependence on fossil fuels puts the world at risk of an unprecedented energy crunch that could inflame financial crisis and exacerbate dangerous climate change.
The ‘Transatlantic Energy Security Dialogue‘, which took place on 10th December last year, was co-organised by a US Army official, Lieutenant Colonel Daniel L. Davis, in association with former petroleum geologist Jeremy Leggett, chairman of the UK Industry Taskforce on Peak Oil and Gas.
Participants, who addressed one another via video link, consisted of retired military officers, security experts, senior industry executives, and politicians from the main parties – including two former UK ministers. According to US Army colonel Daniel Davis, a veteran of four tours of duty in Afghanistan and Iraq, and regular contributor to the Armed Forces Journal:
“We put the event together because the prevailing idea that we have a bright future of increasing oil and gas production that can sustain our current way of life indefinitely is based on a selective appraisal of the data. We brought together experts from across the spectrum, and with a wide range of opinions, to have a comprehensive look at all the relevant data. When you only look at certain things, like the very real resurgence of US oil and gas production, the picture looks fine. But when you dig deeper into the data, it becomes clear that this is only part of the picture. And the big picture proves that our current course cannot continue without significant risks.”
The dialogue opened with a presentation by Mark C. Lewis, former head of energy research at Deutsche Bank’s commodities unit, who highlighted three interlinked problems facing the global energy system: “very high decline rates” in global production; “soaring” investment requirements “to find new oil”; and since 2005, “falling exports of crude oil globally.”
Lewis told participants that the International Energy Agency’s (IEA) own “comprehensive” analysis in its World Energy Outlook of the 1,600 fields providing 70% of today’s global oil supply, show “an observed decline rate of 6.2%” – double the IEA’s stated estimate of future decline rate out to 2035 of about 3%.
The IEA report also shows that despite oil industry investment trebling in real terms since 2000 (an increase of around 200-300%), this has translated into an oil supply increase of just 12%. Lewis said:
“That is a very striking number and one I think that should be ringing alarm bells. It indicates to me that something has fundamentally changed in the economics of the oil industry and that you’re having to invest more and more for diminishing incremental production.”
Lewis also referred to US Energy Information Administration (EIA) data showing that although global crude oil exports increased “year on year from 2001 to 2005”, they “peaked in 2005 and have been trending down since 2009.” Lewis attributed this trend to rapidly rising populations in the Middle East which has led to escalating domestic oil consumption, effectively eating into the quantity of oil available to export onto world markets.
OPEC (Organisation of Petroleum Exporting Countries) populations since 2000 have increased at twice the rate of the world as a whole. This has driven them to increase their oil consumption four times faster, or by 56%, relative to the rest of the world.
Such increases in domestic consumption, curtailing global exports, have been enabled by a corresponding increase in domestic subsidies, said Lewis. Fossil fuel subsidies have increased to $544 billion, nearly half of which amounted to oil subsidies dominated by Saudi Arabia and Iran.
Against this consistent trend of rapidly declining oil exports, Lewis questioned the IEA’s projection of an increase in global crude oil exports and imports from 35 to 38 million barrels a day out to 2035. He pointed out that if such domestic subsidies are removed by OPEC to facilitate increased exports, this would increase “the risk of greater domestic stress and social disorder”, as already seen since the ‘Arab spring’.
Lewis’ presentation was complimented by geoscientist David Hughes, formerly of the Geological Survey of Canada, who cited a wealth of official data demonstrating that shale oil production is likely to peak around 2016-17. Similarly, US shale gas production has sustained a plateau for the last year that is unlikely to retain long-term sustainability due to spectacularly high decline rates, and because the vast majority of production comes from just two or three plays.
The upshot is that continued dependence on fossil fuels is becoming increasingly expensive, with oil prices continuing to rise for the foreseeable future, impinging evermore on global economic growth. At worst, declining global exports point to a risk of an oil crunch that could, in turn, trigger another financial crash.
Co-convener of the conference Leggett, author of the new book, The Energy of Nations, said:
“It should not be forgotten that only a very few people warned that the financial incumbency had their particular comforting narrative catastrophically wrong, until the proof came along in the shape of the financial crash.” According to Leggett, a global energy crisis is unlikely to “erupt fully until 2015 at the earliest.”
According to Lt. Col. Davis, scepticism of the oil industry’s bullishness about future production is growing amongst senior Pentagon officials:
“A lot of high-ranking officials are starting to ask exactly these hard questions about the sustainability of the current energy system. You’ve got to remember that for the military, it doesn’t matter what you want to do. What matters is what you can do, and it’s our top priority to make sure we understand potential limits to our operational capability. Even the EIA is forecasting that we could see a peak of shale production by 2018 followed by a plateau and decline, and the Pentagon knows this. But our transport infrastructure is totally dependent on liquid fuels. How are we going to sustain that infrastructure with these decline rates? That’s why serious questions are being asked by high level US military officials as to what exactly the Army, as well as American society in general, is going to do to address this challenge.”
Dr Nafeez Ahmed is executive director of the Institute for Policy Research & Development and author of A User’s Guide to the Crisis of Civilisation: And How to Save It among other books. Follow him on Twitter @nafeezahmed
Ghung on Fri, 17th Jan 2014 3:09 pm
“The IEA report also shows that despite oil industry investment trebling in real terms since 2000 (an increase of around 200-300%), this has translated into an oil supply increase of just 12%.”
I cite this fact to folks and they simply go glassy-eyed. It doesn’t compute, especially when they can go out and fill their fuel tanks. It’s a “little more expensive” than it used to be, but that’s the cost of doing BAU.
As for “What matters is what you can do, and it’s our top priority to make sure we understand potential limits to our operational capability.” Since the military will always be given priority, I doubt that’s their main concern. They’re probably more worried about wars for resources, or, worse yet, having to deal with severe domestic social disruptions.
Northwest Resident on Fri, 17th Jan 2014 3:32 pm
What are the chances that the military leadership has already come to the same conclusion that many of us posting on this website have come to — that there is realistically not much if anything that we can do to “scale down” or “transform” our economy to deal with the reality of rapidly decreasing fossil fuel energy availability. And since they have probably come to that reality-based conclusion, they have no choice but to prepare for the crash-and-burn scenario that many of us refer to as “collapse”.
According to Leggett, a global energy crisis is unlikely to “erupt fully until 2015 at the earliest.”
That year 2015 keeps coming up. It was first mentioned (that I am aware of) in the Joint Operating Environment of 2010 document, where top military strategists predicted that in 2015 we would have a 10% energy “shortfall” due to inadequate inputs of fossil fuels.
It is amazing to all of us how TPTB keep BAU going at all, and we all know it can’t go on like this much longer. I posted an article yesterday that made a very clear point — by the end of 2014, tax revenue in America won’t be sufficient to pay off the interest on the national debt.
We may not see “collapse” in 2015, but from my point of view, 2015 is sounding and looking like the year that it all just falls apart. Gotta get ready for a big date.
J-Gav on Fri, 17th Jan 2014 4:29 pm
Wow! A 6.2 decline rate for 70% of total supply? If true, that should be front-page news, but of course, just as with the 1st quote ghung gives above, it will pass largely unnoticed.
GregT on Fri, 17th Jan 2014 5:45 pm
Anyone who believes that TPTB haven’t given this issue a great deal of consideration, for a very long time, is purely delusional. As with all dilemmas, there are no comfortable solutions, only choices, and when push comes to shove, it will be every man for himself.
The time is rapidly approaching for all of us to make choices for ourselves. Make plans for your own future well being, nobody else is going to do it for you. They have their own choices, and their own well being, to be concerned about.
action on Fri, 17th Jan 2014 6:02 pm
Cannibal apocalypse where millions of hungry morons go ape shit. I’m training my body to eat grass, sticks and leaves and to be able to run 80 miles a day.
TwinPerformance on Fri, 17th Jan 2014 6:59 pm
Cannibal apocalypse where millions of hungry morons go ape shit. I’m training my body to eat grass, sticks and leaves and to be able to run 80 miles a day.
lol
Northwest Resident on Fri, 17th Jan 2014 7:24 pm
GregT, we are once again in total agreement. But who knows, maybe TPTB have a plan to keep BAU going just fine, but on an ever-descreasing level where more and more people join the ranks of the unemployed/impoverished and the rest of the us just keep working and plugging along same as always. But more unemployed and impoverished in America translates to even LESS demand for business products and that of course leads to even more unemployment and impoverishment. Looking at all the facts, it is just hard to envision a possibility that involves “BAU forever”.
GregT on Fri, 17th Jan 2014 7:33 pm
action,
Don’t forget, Zombies feed on people too! Fortunately for you, it sounds like you will be able to outrun them. 🙂
Dave Thompson on Fri, 17th Jan 2014 10:53 pm
Warning bells are starting to ring, will they be heard over the din of drill baby drill? I see a manufactured fear/crisis on the horizon. Some kind of plan by the powers that pull the strings to do a BAU reset. A shooting war would be to risky, but short of flat out telling the truth that we are in a irreversible decline,what would it be? If the news media turned the script into a truthful narrative of our world predicament, perhaps we could go into a WWII type lets pull together as Americans and defeat the enemy of conspicuous consumption as the new dynamic.
PrestonSturges on Sat, 18th Jan 2014 4:52 pm
The military should be one of the first to feel the shortage of oil, because without fossil fuels they’d be walking to the next war. And that would spoil the party for them.
GregT on Sat, 18th Jan 2014 8:38 pm
Preston,
Somehow I don’t see the militaries of the world giving up the last remainder of the oil, just so that the people can continue shopping at Walmart. It is us regular people that will go without, long before the elite, or their military industrial complexes.
It is, after all, their party, and they’ll do whatever they want to.
Oscar3Kilo on Sun, 19th Jan 2014 1:23 am
The military can “Confiscate material as needed to operate in times of emergency”. We will be walking before the military even thinks about carpooling.