Energy Matters – Page 35

Category: Energy Matters

The twentieth century way of life has been made available, largely due to the miracle of cheap energy. The price of energy has been at record lows for the past century and a half.As oil becomes increasingly scarce, it is becoming obvious to everyone, that the rapid economic and industrial growth we have enjoyed for that time is not sustainable.Now, the hunt is on. For renewable sources of energy, for alternative sources of energy, for a way of life that is less dependent on cheap energy.Â

Too fearful to publicise peak oil reality

What made this little graph so devastating was that it estimated energy resources by 2030 that were woefully inadequate for the energy-hungry economies of India and China. Business as usual in oil production threatens massive conflict over sharing it.

Now, this all seemed pretty gigantic news to me but guess where the World Energy Outlook chose to put this graph? Was it in the front, was it prominently discussed in the foreword? Did it cause headlines around the world. No, no, no. It was buried deep into the report and no reference was made to it in the press conference a year ago.

The fear is that panicky markets can cause enormous damage – panic-buying that prompts fights over resources, which in turn could lead to power cuts in some places and other such mayhem. But so far in facing this huge challenge, our political/economic system seems unable to cope with reality. We are forced to carry on living in an illusion that we have so much time to adapt to post-oil that we don’t even need to be talking or thinking much about what a world without plentiful oil would look like. Reality has become too dangerous.

So in reply to the Queen’s question of a few years hence, we did see it coming but we chose to ignore it.

Peak oil alarm revealed by secret official talks

Experts say they have received a letter from David Mackay, chief scientific adviser to the DECC, asking for information and advice on peak oil amid a growing campaign from industrialists such as Sir Richard Branson for the government to put contingency plans in place to deal with any future crisis.

A spokeswoman for the department insisted the request from Mackay was “routine” and said there was no change of policy other than to keep the issue under review. The peak oil argument was effectively dismissed as alarmist by former energy minister Malcolm Wicks in a report to government last summer, while oil companies such as BP, which have major influence in Whitehall, take a similar line.

But documents obtained under the FoI Act seen by the Observer show that a “peak oil workshop” brought together staff from the DECC, the Bank of England and Ministry of Defence among others to discuss the issue.

A ministry note of that summit warned that “[Government] public lines on peak oil are ‘not quite right’. They need to take account of climate change and put more emphasis on reducing demand and also the fact that peak oil may increase volatility in the market.”

Those comments were written 12 months ago, but a letter in response to the FoI request written by DECC officials and dated 31 July 2010 says it can only release some information on what is currently under policy discussion because they are “ongoing” and “high profile” in nature.

The letter adds: “We recognise the public interest arguments in favour of disclosing this information. In particular we recognise that greater transparency makes government more open and accountable and could help provide an insight into peak oil.

“However any public interest in the disclosure of such information must be balanced with the need to ensure that ministers and advisers can discuss policy in a manner which allows for frank exchanges of views and opinions about important and sensitive issues.”

Yet the note of the workshop distributed last year talks about secrecy around the topic being “probably not good”, although it also suggests officials stick to the line that the “International Energy Agency is an authoritative source in this field” and stresses how the IEA believes there is sufficient reserves to meet demand till 2030 as long as investment in new reserves is maintained.

But the Paris-based organisation has come under increasing scrutiny from a growing group of critics who believe the IEA’s optimism is misplaced. Last year the Guardian revealed that the IEA was also riven with dissent over the issue with senior staff members privately telling newspaper they thought the official numbers on future global oil supply were over-optimistic.

The IEA predicted in the 2009 World Energy Outlook published last November that oil demand would grow from 85m barrels a day today to 88m in 2015 and reach 105m in 2030. The organisation presumes the challenge of meeting that demand can equally be met by a mixture of higher Opec production and considerably more output from unconventional sources.

But an internal IEA source said: “Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible, but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources.”

The IEA has denied the claims of internal dissent and sticks by its figures. But Kjell Aleklett, a professor of physics at Uppsala University in Sweden and author of a report The Peak of the Oil Age, claims crude production is more likely to be 75m barrels a day by 2030 than the “unrealistic” 105m projected by the IEA.

German Military Report: Peak Oil Could Lead to Collapse of Democracy

That collapse could, in turn, cause many countries to abandon free markets principles, the report states. Deals would be struck between oil-exporting and oil-importing countries that would fix prices and remove large amounts of oil from the global market place.

“The proportion of oil traded on the global, freely accessible oil market will diminish as more oil is traded through bi-national contracts,” the report states.

That would prompt some governments to abandon free market economics altogether, the report suggests. With peak oil causing “partial or complete failure of markets … [a] conceivable alternative would be government rationing and the allocation of important goods or the setting of production schedules and other short-term coercive measures to replace market-based mechanisms in times of crisis.”

But the report also warns that the economic crisis caused by shrinking oil supplies and skyrocketing prices could be seen by the general public as a failure of market economics as a whole — and with it, the political institutions that created those economic systems.

Public anger at the existing system would create “room for ideological and extremist alternatives to existing forms of government.” Populations would fragment along political lines and “in extreme cases” this could “lead to open conflict.”

Peak oil — which refers to the moment when the world’s production of oil begins to shrink — is a controversial concept, but few doubt the basic logic underlying it: That eventually the world’s finite supply of oil will run out, and nations will have to turn to other sources of energy, or face economic disaster.

With the report, Germany joins the growing ranks of Western governments apparently alarmed by the prospect of peak oil.

Last Sunday, the UK Observer reported that Britain’s Department of Energy and Climate Change is refusing to release documents related to peak oil, even though, as the Observer noted, previously released documents argue the veil of secrecy around the issue is probably “not good.”

The UK government is reportedly canvassing leading scientists and industrialists for their advice on how to build a contingency plan for peak oil.

And earlier this year, a report from the US Joint Forces Command stated that “by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day.”

The report continued, “While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India.”

Not everyone agrees that peak oil is a reality — at least not yet. Detractors point out that predictions of peak oil have been made since the 1950s, and the date for it was originally pegged at around 1995. But the discovery of new oil fields and the development of new technologies for oil extraction mean that oil production has continued unabated in new oil fields even as traditional oil supplies run dry.

Peak oil skeptics argue that rising oil prices are responsible for the continuing supply of oil — as oil gets more expensive, extracting it from difficult places becomes more profitable. Some argue this process could continue for decades.

But environmentalists point out that these new alternative methods of extracting oil are more environmentally harmful than traditional methods. Producers in the Alberta oil sands, for example, use large amounts of water to push oil out of sand, and the thick oil produced by this process is significantly higher in carbon content than the light, sweet crude imported from the Middle East.

Oil platform explodes in Gulf of Mexico

An estimated 4.9 million barrels of oil gushed out of a deepwater well that ruptured after the BP-leased Deepwater Horizon drilling rig exploded on April 20 off the coast of Louisiana.

The explosion killed 11 workers and it took nearly three months to stem the flow of oil gushing out of the well about 1500 metres below the surface.

“How many times are we going to gamble with lives, economies and ecosystems?” said John Hocevar, Greenpeace USA oceans campaign director.

“It’s time we learn from our mistakes and go beyond oil.”

The Mariner Energy platform that caught fire on Thursday was operating in relatively shallow water, about 103m, and was not drilling at the time of the explosion, the Texas-based company said.

It had been producing approximately 1400 barrels of oil and condensate and 9.2 million cubic feet of natural gas a day.

Louisiana Governor Bobby Jindal said Mariner told him that the fire started in one of seven active wells on the platform and that “all seven are shut in right now”.

The White House said it was monitoring the situation and reserved judgment until more information was available.

“We will continue to gather information as we respond, we obviously have response assets ready for deployment, should we receive reports of pollution in the water,” White House spokesman Robert Gibbs told reporters.

Gibbs declined to say whether the president believed inspections of rigs in the Gulf of Mexico was moving fast enough in the wake of the BP disaster.

“Obviously we’ve had taken some, we took a series of steps after the BP incident,” Gibbs said.

“If this situation warrants, we’ll certainly update that.”

It was also not clear how this incident would affect Obama’s moratorium on offshore drilling, which is being challenged in the courts and has faced harsh criticism from his political foes.

The House Energy and Commerce Committee, which has held a congressional investigation into the BP spill, sent a swift letter to Mariner Energy’s chairman requesting a briefing on the incident.

“In the wake of the BP catastrophe, this is an extremely disturbing event,” said committee chairman Henry Waxman.

“I call on the administration to immediately redouble safety reviews of all offshore drilling and platform operations in the gulf and take all appropriate action to ensure safety and protection of the environment.”

AFP

Peak oil. Coming to a bowser near you

The study is a product of the Future Analysis department of the Bundeswehr Transformation Center, a think tank tasked with fixing a direction for the German military. The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of the “total collapse of the markets” and of serious political and economic crises.

The study, whose authenticity was confirmed to SPIEGEL ONLINE by sources in government circles, was not meant for publication. The document is said to be in draft stage and to consist solely of scientific opinion, which has not yet been edited by the Defense Ministry and other government bodies.

The lead author, Will, has declined to comment on the study. It remains doubtful that either the Bundeswehr or the German government would have consented to publish the document in its current form. But the study does show how intensively the German government has engaged with the question of peak oil.

Parallels to activities in the UK

The leak has parallels with recent reports from the UK. Only last week the Guardian newspaper reported that the British Department of Energy and Climate Change (DECC) is keeping documents secret which show the UK government is far more concerned about an impending supply crisis than it cares to admit.

According to the Guardian, the DECC, the Bank of England and the British Ministry of Defence are working alongside industry representatives to develop a crisis plan to deal with possible shortfalls in energy supply. Inquiries made by Britain’s so-called peak oil workshops to energy experts have been seen by SPIEGEL ONLINE. A DECC spokeswoman sought to play down the process, telling the Guardian the enquiries were “routine” and had no political implications.

The Bundeswehr study may not have immediate political consequences, either, but it shows that the German government fears shortages could quickly arise.

Part 2: A Litany of Market Failures

According to the German report, there is “some probability that peak oil will occur around the year 2010 and that the impact on security is expected to be felt 15 to 30 years later.” The Bundeswehr prediction is consistent with those of well-known scientists who assume global oil production has either already passed its peak or will do so this year.

Market Failures and International Chain Reactions

The political and economic impacts of peak oil on Germany have now been studied for the first time in depth. The crude oil expert Steffen Bukold has evaluated and summarized the findings of the Bundeswehr study. Here is an overview of the central points:

Oil will determine power: The Bundeswehr Transformation Center writes that oil will become one decisive factor in determining the new landscape of international relations: “The relative importance of the oil-producing nations in the international system is growing. These nations are using the advantages resulting from this to expand the scope of their domestic and foreign policies and establish themselves as a new or resurgent regional, or in some cases even global leading powers.”
Increasing importance of oil exporters: For importers of oil more competition for resources will mean an increase in the number of nations competing for favor with oil-producing nations. For the latter this opens up a window of opportunity which can be used to implement political, economic or ideological aims. As this window of time will only be open for a limited period, “this could result in a more aggressive assertion of national interests on the part of the oil-producing nations.”
Politics in place of the market: The Bundeswehr Transformation Center expects that a supply crisis would roll back the liberalization of the energy market. “The proportion of oil traded on the global, freely accessible oil market will diminish as more oil is traded through bi-national contracts,” the study states. In the long run, the study goes on, the global oil market, will only be able to follow the laws of the free market in a restricted way. “Bilateral, conditioned supply agreements and privileged partnerships, such as those seen prior to the oil crises of the 1970s, will once again come to the fore.”
Market failures: The authors paint a bleak picture of the consequences resulting from a shortage of petroleum. As the transportation of goods depends on crude oil, international trade could be subject to colossal tax hikes. “Shortages in the supply of vital goods could arise” as a result, for example in food supplies. Oil is used directly or indirectly in the production of 95 percent of all industrial goods. Price shocks could therefore be seen in almost any industry and throughout all stages of the industrial supply chain. “In the medium term the global economic system and every market-oriented national economy would collapse.”
Relapse into planned economy: Since virtually all economic sectors rely heavily on oil, peak oil could lead to a “partial or complete failure of markets,” says the study. “A conceivable alternative would be government rationing and the allocation of important goods or the setting of production schedules and other short-term coercive measures to replace market-based mechanisms in times of crisis.”
Global chain reaction: “A restructuring of oil supplies will not be equally possible in all regions before the onset of peak oil,” says the study. “It is likely that a large number of states will not be in a position to make the necessary investments in time,” or with “sufficient magnitude.” If there were economic crashes in some regions of the world, Germany could be affected. Germany would not escape the crises of other countries, because it’s so tightly integrated into the global economy.
Crisis of political legitimacy: The Bundeswehr study also raises fears for the survival of democracy itself. Parts of the population could perceive the upheaval triggered by peak oil “as a general systemic crisis.” This would create “room for ideological and extremist alternatives to existing forms of government.” Fragmentation of the affected population is likely and could “in extreme cases lead to open conflict.”

The scenarios outlined by the Bundeswehr Transformation Center are drastic. Even more explosive politically are recommendations to the government that the energy experts have put forward based on these scenarios. They argue that “states dependent on oil imports” will be forced to “show more pragmatism toward oil-producing states in their foreign policy.” Political priorities will have to be somewhat subordinated, they claim, to the overriding concern of securing energy supplies.

For example: Germany would have to be more flexible in relation toward Russia’s foreign policy objectives. It would also have to show more restraint in its foreign policy toward Israel, to avoid alienating Arab oil-producing nations. Unconditional support for Israel and its right to exist is currently a cornerstone of German foreign policy.

The relationship with Russia, in particular, is of fundamental importance for German access to oil and gas, the study says. “For Germany, this involves a balancing act between stable and privileged relations with Russia and the sensitivities of (Germany’s) eastern neighbors.” In other words, Germany, if it wants to guarantee its own energy security, should be accommodating in relation to Moscow’s foreign policy objectives, even if it means risking damage to its relations with Poland and other Eastern European states.

Peak oil would also have profound consequences for Berlin’s posture toward the Middle East, according to the study. “A readjustment of Germany’s Middle East policy … in favor of more intensive relations with producer countries such as Iran and Saudi Arabia, which have the largest conventional oil reserves in the region, might put a strain on German-Israeli relations, depending on the intensity of the policy change,” the authors write.

When contacted by SPIEGEL ONLINE, the Defense Ministry declined to comment on the study.

WA government acquires land for Woodside gas plant

The Premier said he had not taken the decision lightly and he conceded there could be criticism nationally and even internationally.

2009 Australian of the Year Professor Mick Dodson this week condemned compulsory acquisition as an invasion and theft.

“I expect there will certainly be some angst,” Mr Barnett said.

But he claimed he had been “remarkably patient” in trying to negotiate an agreement.

He said the disputes that had now arisen between the local Aboriginal people, who were divided on the plan, had simply stymied the process.

The area involved is unallocated crown land at James Price Point, 60 km north of Broome.

Mr Barnett said $1.5 billion of benefits would flow to the traditional owners under a ‘heads of agreement’ signed last year between Woodside, the state government and the Kimberley Land Council before the negotiations broke down, and that agreement would be honoured under the compulsory acquisition.

He said the benefits, including jobs, business opportunities, health, education, housing and training opportunities as well as cash, would help end welfare dependency.