I have begun to read a rather candid report by the Netherland-based Clingendael International Energy Programme (CIEP): "Oil turbulence in the next decade: An Essay on High Oil Prices in a Supply-constrained World". The authors are Jan-Hein Jesse and Coby van der Linde.
Link to publication:
http://www.clingendael.nl/publications/ ... _jesse.pdf
CIEP is an organization that is apparently endorsed by BP, the Dutch Ministry of Economic Affairs, Total E&P Nederland, and various other government ministries and energy-related organizations, and thus it appears that some EU nations are waking up to the fact that by the next decade, peak oil will be a fait accompli....
Here are some notable excerpts from pages 7 thru 11:
$this->bbcode_second_pass_quote('', '[')b]OIL PRICE
The current high oil prices are still primarily driven by structural factors and can be explained without resorting to throwing blame at speculative investors playing the futures market or at the low dollar. Prices are mainly driven by the supply and demand imbalannces and the fear that these will further deteriorate in the next decade.
Until recently, the oil price was largely underpinned by the marginal cost of the last barrel needed to match demand, with some political and econokmic conjuncture mark-ups or -downs. This currently puts a structural floor of $110 a barrel under the oil price (WTI).
PeakOil is You
Report "Oil turbulence in the next decade" - June
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Report "Oil turbulence in the next decade" - June
by Petrodollar » Thu 31 Jul 2008, 10:02:08
...regarding Supply and Demand, the authors are refreshingly candid...
$this->bbcode_second_pass_quote('', 'A') new supply/demand outlook of around 100-105 million b/d for 2030, most likely to be published by the International Energy Agency (IEA) in their next edition of the WEO in November (versus 116 million b/d in the WEO 2007), will have far reaching implications.
It basically means that world oil (and liquids) supply can grow at only half the rate in the next 22 years than earlier anticipated (circa 13-18 million b/d versus 29 million b/d).
If correct, it implies that the world will have to go through a period of substantial demand destruction - in the order of a half to two thirds of today's oil demand in the US, or up to 100% of the oil projected to imported by China in 2030. {!!!}
A possible quickening of the underlying oil field decline rates at the time deepwater oil production (circa 10% of the global supply) goes off plateau in the first half of the next decade caould make this pessimistic supply outlook even worse.
But even with stable observed decline rates, the industry still has to bring twice as much new oil and liquids onto the market in the next 22 years than what they have done over the past 22 years - around 80 million b/d if supply and demand were to grow to 116 million b/d by 2030 as per WEO 2007, or 70 million b/d in case supply can't grow much further than recently suggested.
...and here is the first time that I have read a quasi-gov't think tank write about the requirement of demand rationing, esp in the US:
$this->bbcode_second_pass_quote('', 'I')n practive this means that demand rationing will be required in the OECD countires and particularily in the US, in order to accomodate growth in the newly developing countries, notably China and India.
Different fuel prices for end-consumers in the different countries will be the dominant factor behind this 'oil redistribution'.
Through a combination of current OPEC policies and different price mechanims in the differnnt consumer regions, the OECD countries pay twice for the burden: once directly at the pump, and secondly indirectly by rationing demand to accommodate the surge in oil demand in the emerging economies, where consumers benefit from subsidized prices but drive up prices in international markets.
In parallel with the OECD countries accomodating the economic growth of emerging economies, the latter countries have to work away their oil product subsidies withouth triggering a jump in consumer proice inflation, in order to improve energy efficiency and to reduce world oil demand growth. {thats quite a cahllenge...}
...and the authors even state what will happen if the above items do not take place within the next decade...
$this->bbcode_second_pass_quote('', 'T')he alternative is that new and oil oil consumers end up in a firece competition for scare oil supplies at much higher price levels, with the risk of triggering a deep and prolonged recession and possible geopolitical tensions.
...Lots more I need to read, but the first 12 pages of the report are remarkably candid and well presented (includng some interesting comments about Iraq).
Here's the conclusion of the CIEP report (page 105), which is essentially the same conclusion that I reached in my book a couple of years ago:
$this->bbcode_second_pass_quote('', 'I')rrespective what will happen with the oil price in the short term, the outlook for the next decade is bleak, and effective global leadership and a determination to cooperate are urgently needed. Many countries are taking the right initiatives to combat oil dependcy and climate change. However, these are long-term actions of which the impact will only become visible over time. In the interim period, the coming decade, things could get much worse before turning better, especially if interests (especially between the major resource holders and consumer countries) further diverge. In the adsence of a more harmonious world, the world economy could suffer terribly, which is ultimately bad for consumers and producers alike. In this light, their is no alternative than to change positions and to become more cooperatibve in adequately tackling the energy and climate challenges, so that the world can become a better place by 2020 and beyond.
Overall, I recommend that others read this detailed report.
Anecdotally speaking, I suspect we could see global oil prices over $150 in the months immediately following IEA's publication of its 2008 WEO report (in November 08') with perhaps a separate appendix on the world's largest 400 oil fields, which may show that these fields are declining around 4% per year.
Unfortunately, the effects of these IEA reports on the market will likely catch the average American by surprise...and we'll continue to blame speculators and a declining dollar - as opposed to the fundamentals. I really wish the US-based EIA would publish a similar report to the CIEP in an effort to wake-up Americans about the global energy landscape, and allow us to have a real debate this fall about Peak Oil policy differences between John McCain and Barak Obama, but I doubt that Guy Caruso, who heads the EIA has the courage to push thru this administration an honest report on the Peak Oil issue and coming turbulence in the global marketplace...
Last edited by Petrodollar on Thu 31 Jul 2008, 15:29:21, edited 5 times in total.
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