Katrina and Rita have changed the dynamics of Peak Oil. Before the two hurricanes, Yelnick posted a summary of the Peak Oil risk, and said it was at least a few years away. Tonight at the Commonwealth Club in SF, longtime oil Cassandra Richard Heinberg (author of The Party's Over: Oil, War and the Fate of Industrial Societies) explained why this window until the peak has now seriously shrunk.
Previously it was believed that oil production would peak around 95-100 million barrels a day (the peak number comes from the head of the Chinese overseas oil company, who *really* needs to know). Currently peak productive capacity is at 85m. Demand growth (China again) needs around 2m more a day, every year; plus to make up for declining, older wells, we need another 4m a day, every year. This 6m is cumulative, meaning each year that goes by is another 6m we need to find. The 95m peak represents at best another five years until Peak Oil, and that assumes that over the next five years we can find a new 30m barrels a day from somewhere. Some predictions put the peak as close as two years away, or 2007, as they doubt we can ramp up production even as much as another 10m a day to 95m.
Katrina has not only taken about 1-2m barrels a day offline, it has also trashed a number of oil exploration platforms. We might get the 1-2m capacity back online in a few weeks, but building new exploration rigs takes up to 5 years. This is critical since we need to find 4m more daily capacity per year to make up for declining wells, and a 5 year lag could be a cumulative large shortfall.
Can Canadian oil tar make up for this? It is economical to extract at $30 cost per barrel when oil is at $65 market price, but it cannot be quickly extracted: 1m today, maybe 2m soon, and 4m max. At best it stops the decline, for a while. Large reserves, small production.
Any other potential windfalls? Oil discoveries peaked in 1980. We have been extracting more than we find for 25 years. Peak Oil is inevitable - the question is how soon. After Katrina, maybe sooner than anyone thought.
Can't we rely on market forces? Won't the market send price signals to encourage conservation & incent alternative fuels? Sure. But - a very distressing but - it will take around 20 years for the market to rebalance. Five years to develop new cars, a similar period to build alternative capacity, and then 15 years to replace the fleet. A tough 20 years to live through.
We should have started 20 years ago. Or ten. But oil dropped to
$10 a barrel. The wisdom of markets! Government should have planned
ahead, but then again, we couldn't even leave town for a hurricane we
all knew was coming. Then we all left when we didn't need to.
Planning is sometimes hard, even when people aren't involved. Then it
is impossible.
Katrina has given us a 5 year warning before Peak Oil, a blessing in disguise. Will we use it wisely? Look for Bush to pull out Jimmy Carter's cardigan sweater from 1977 and announce a major shift in US policy this coming Monday. Maybe. Hopefully.
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