energy peak oil politics

The government’s other peak oil report

A couple of years ago the government released The Wicks Report on energy security. It was an almost stunningly complacent piece of work from the former energy minister, claiming in the first paragraph that “there is no crisis”. Using the IEA’s rosiest figures and ignoring the government’s own cross-party working group on peak oil, Wicks concluded that the world could look forward to 40 more years of easy oil.

Today I learned that this was actually one of two peak oil reports produced by the Department for Energy and Climate Change. The other was not published, and has only now been released after a series of Freedom of Information requests.

Report on the risks and impacts of a potential future decline in oil production’ is the result of an internal study by the Business Department, and its conclusions are rather different from Malcolm Wicks’. They suggest that a permanent decline in oil production is “unlikely to take place before 2020”, but that it is impossible to predict, the consequences would be serious, and that “the lead-times for Governments and economic systems to adjust to peak oil could be several years or even decades.” Considering the IEA have changed their tune and started saying the conventional oil peak is already 5 years behind us, this is a little concerning.

DECC declines to produce their own estimate, but it does include this handy summary:

For the first time I’ve seen in a government publication, there is an acknowledgement that OPEC overestimates:

OPEC data on reserves rarely changed despite ongoing production and exploration and no objective review of reserves has been possible. Also, there may be periodic incentives for OPEC members to overstate reserves in order to increase OPEC production quotas. International Oil Companies may have an incentive to overstate assets to boost share prices but to underestimate resources to negotiate better exploration conditions.

This is important, as without transparency in stated reserves, we just don’t have any idea how much oil really is left.

The report is also pretty clear about the potential effects of peak oil, including inflation, falling GDP, and even social unrest:

Finally, the report concludes that there are no policies the government could pursue to avoid peak oil, but that we ought to be ready and move faster on creating a low carbon economy. In classic have your cake and eat it government fashion, they end by declaring their intentions to both maintain oil supplies and reduce carbon emissions:

“Whilst we are committed to delivering the required investment in both conventional and new sources of oil in order to maintain sufficient supply to meet existing and future demand, it is important that as Government we help manage the transition to and opportunities of a low carbon economy.”

Perhaps it’s easy to see why this report was buried. Finalised in November 2007, the financial implosion was already underway. The last thing the markets needed was more bad news, presumably. So they sat on  it for two years, updated it, and then sat on it for two more until forced to release it.

Still, it’s out there now, and now we know – the government does take peak oil seriously after all. It does understand it, and it  is concerned. But it would much rather you didn’t know that and didn’t ask questions – so make sure you do.

21 comments

  1. I think the reason that the “conclusions are rather different” is because they are two different things. Mr Wicks report is an analysis of the known facts, while the anonymous one is a fictional work of what if senarios. Or in alarmispeak (after the fact) it was one of the possible outcomes… that didn’t come true.

    By the way, hows that Heather Mills doin’ with her veggie resteraunt Turnips R Us or something… is it closing in on the number of McDonalds joints like she predicted?

    1. Sorry, in what way did it not come true, considering the report suggests the problem is still in the future?

      PS – I’ve got a couple of unrelated questions for you. I’ll send them by email.

  2. Maybe Europe doesn’t know where it’s oil will come from, some speculate OPEC is not increasing output because it can’t, but we in North America do…

    – the Gulf of Mexico is estimated to hold 45 billion barrels in recoverable reserves.
    – some project the Eagle Ford shale holds about 25 billion barrels of oil, making it the most significant recent oil discovery in the United States.
    – the Bakken shale in North Dakota. The United States Geological Survey estimates the recoverable reserves at 24 billion barrels in the region.
    – Arctic National Wildlife Refuge, the mean estimate of geologists places the figure at 10.4 billion barrels of recoverable reserves.

    All told thats another 14 years at a US consumption of 20 million barrels per day. http://www.fool.com/investing/general/2011/06/13/a-crude-crisis.aspx

    And for us in Canada… 4 words… ethical oil tar sands. Futures so bright I gotta wear shades… http://www.youtube.com/watch?v=1YXkiiek0pM&feature=related apropos no?

    1. You can imagine my shock at finding you deny peak oil. But let me play along for a second.

      Let’s assume these estimates, which I notice from your link are the oil company’s own, are entirely correct. Let’s assume that every last drop of it is recoverable. Let’s assume that US consumption continues at the current rate and doesn’t rise. By your calculations, that gives the US 14 years to change its entire transport infrastructure.

      1. Just Alberta and Venezuela have reserves of 3.6 Trillion barrels of Oil Sands. Total world reserves of conventional oil sit at 1.75 Trillion barrels.

        At current levels of production it will take over 300 and 14 years to produce the easy to get at oil sands. As extraction tech is rapidly advancing oil sands production is becoming alot less water, Co2 and energy intensive. Already it’s closing in on conventional sources.

        The little known fact is,( learned first hand talking to drilling consultants working the area). Is that the Oil Sands actually go alot further into Saskatchewan. http://oilsandstruth.org/index.php?q=tar-sands-slowly-expanding-northwest-saskatchewan

        Seeing as this province is larger than Alberta and has vastly under developed oil fields from toe to tip thank’s to the recently ousted Scocialist NDP. It’s likely to have at least as much oil as Alberta. Then there’s Manitoba…

        Russia also has vast reserves of oil sands.

        Oil company’s are not overstating reserves. They have been understating them for a very long time. It’s like a sales pitch at a TV store. “Hurry on down While Supplies Last!”

        Something i don’t understand is why “Peak Oilers” and Green Tech promoters, if they truely belive oil will rapidly run out are so keen to protest production?

        The idea that we can replace hydro carbons with today’s alternatives is just false. In time we may have viable alternatives, but not now. Hydro carbons will be with us for a very long time. Looking for cleaner more responsible ways to consume them should be the focus.

        You have a few years to develop Alternatives before oil runs out. Conservative estimates of oil reserves sit at 5,350,000,000,000 barrels. US consumption is at 20,000,000 barrels per year.

        1. This is a common misconception. The amounts are vast, even taking into account that only 20% are accessible to open-cast mining. The problem with tar sands is not one of quantity, but of production. The reason tar sands don’t solve the peak oil question is that you can only get them out a little at a time. If your bank will only allow you to withdraw a dollar a day, it doesn’t matter whether you have a million or a billion in your account. You’re still going to be broke. That’s kind of the situation with the tar sands – impressive reserves, less impressive production.

          Let me back that up for you with an optimistic production scenario. According to the Canadian Association of Petroleum Producers, production will rise to 4.7 million barrels per day by 2025. (see http://www.capp.ca) Canada itself uses over 2 million barrels a day, so that leaves 2.7 million for export onto the world market. That’s less than a third of what Saudi Arabia can produce at full capacity, and nowhere near enough to offset the declines elsewhere.

          1. From the same site you linked to. http://www.capp.ca/aboutUs/mediaCentre/CAPPCommentary/Pages/CBCTippingPoint.aspx#mIl6TIgLqZ7O

            There’s a little too much alarmisim and not enough science in the public debate about oil sands.

            The extraction methods have vastly improved over time, it’s to the point now that Oil Sands production is approaching conventional oil in emmisions levels. The UofA alone has over 1000 people working on better ways to extract oil.

            The levels of oil sands production have increased over time. They are set to expand immensly. China is investing billions into Alberta. Saskachewan is also going to be a big player.

            One of the biggest choke points in production is the lack of qualified trades people. Something China may be able to address.

            No one field can offset the declines elsewhere but taken in concert the massive recent finds of oil and gas dwarf these declines. http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/with-its-oil-treasure-israel-gets-a-shield-from-tyranny/article2078985/

            “U.S. and Israel would together hold shale reserves in excess of two trillion barrels: Enough oil to fuel these two countries (at combined consumption of eight billion barrels a year) for more than 200 years.”

            Lots of time to look for renewables?

            “Canadian petroleum producers expect to increase production in the next five years by 1.3 million barrels a day (to 4.7 million barrels). Add this increased supply to the North American market and the U.S. oil gap falls to 5.5 million barrels.

            But further still: High oil prices and low natural gas prices imply substantial substitution of gas for oil – most easily in oil-fired production of electricity. U.S. energy analyst Irfan Chaudhry calculates that this kind of substitution could reduce U.S. oil consumption by two million barrels a day. (Mr. Chaudhry says $26 worth of coal now produces as much electricity as $100 worth of oil – as does $24 worth of natural gas.) Subtract this gas-for-oil substitution from the U.S. oil gap and it falls to 3.5 million barrels a day.

            Isreal will effectively change the balance of power the day it exports its first barrel of oil. This shouldn’t take long. With such investors as Lord Rothschild (the banker and philanthropist), Rupert Murdoch (the media magnate) and Dick Cheney (the politician), Israel should be pumping oil within three or four years. Also on board is Shell Oil’s remarkable top scientist, Harold Vinegar, who says the Shfela oil is not only abundant but premium quality as well: “The equivalent of Saudi extra-light.”

            Peak oil is not a shortage of oil it’s a shortage of production.

  3. You’re throwing reserves at me. Peak oil is a production problem, not a reserves issue. Come back with production rates and we’ll talk.

  4. Production rates? I do know a little about that. If there is a market some one will produce it. If there was a production shortage there wouldn’t be so many Rigs Racked. http://www.caodc.ca/statistics/rigcounts-drilling_monthly.html Look at the Utilization figures. Drilling follows the seasons due to the frozen roads and ground allowing better mobility.

    “Since 1940 the highest weekly US rig count was 4,530 recorded on December 28, 1981. The lowest rig count of 488 was recorded on April 23, 1999. In Canada the highest weekly rig count of 718 was recorded on February 17,2006. The lowest weekly rotary rig count of 29 was recorded on April 24,1992.” http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

    Recent price increases are related to the weakened value of indebted nations currency more than they are a shortage of production.

    ” The chart below shows solid support between 8 and 10 barrels/ounce of gold ratio over the last 30 years, with occasional spikes carrying above 20 but seldom holding for any length of time.”

    http://www.incrediblecharts.com/economy/gold_oil_ratio.php

    1. That’s number of rigs, which is doubly irrelevant in the area of tar sands. Production figures please.

      Specifically, projected production rates that show why you think the tar sands will be able to make a significant contribution to future global demand.

  5. You seem to be stuck on the notion that there is a production shortage. Or that it will not be possible to increase production of these proven reserves. Neither is true. http://oilprice.com/Energy/Crude-Oil/Debunking-the-Myth-of-Peak-Oil-Why-the-Age-of-Cheap-Oil-is-Far-From-Over-Part-1.html

    There is excess production capacity now. Production is throttled to keep prices high but not too high. As demand increases more equipment can and will be built and brought on line.

    The Report you cite is on the risks and impacts of a “potential” future decline in oil production”.

    “The risks and impacts of a potential future decline in oil production– i.e. peak oil – is unlikely to take place before 2020.”

    The point of “Peak Oil” is largely determined by price. As prices rise oil that was not profitable becomes so. At some point some alternatives will become viable and over time take up a market share. The switch to other fuels like natural gas for power production will extend this further.

    http://www.gril.net/interview/interview-rick-rule-on-oil-gas-vs-green-energy

    1. No, there’s not a production shortage. I’m responding to your specific point about Canada’s tar sands making peak oil irrelevant.

      The article you’ve pointed me to makes my point for me: “your shiny car will have plenty of gasoline for your lifetime. You may not be able to afford it, but the world cannot possibly run out.” Exactly – you may not be able to afford it. The oil depletion crisis isn’t about running out of oil, it’s about the rising costs of bringing it to market.

  6. I don’t recall claiming that any one find could make peak oil irrelevant. Oil sands are only one of many huge reserves currently being produced or about to be produced. They are set to nearly tripple production by 2020.

    The article only “makes you point” if you only pick the parts that support your point and not the rest.

    “I think the key to the argument of Peak Oil, is that it not only ignores the huge amounts of oil yet to be found, but other hydrocarbon fuels as well. Even if the “theory” holds water, which I argue on its face, we will not be out of hydrocarbons and our cars stranded on the side of the road during this century.”

    It also said when gas prices rise enough other forms of fuels will be consumed. Like Natural Gas. Which is currently half the cost of Gasoline (also cleaner). This is already being contemplated in the US.

    “Oil depletion crisis isn’t about running out of oil, it’s about the rising costs of bringing it to market”. Well at least we have agreed there is no oil shortage.

    These rising costs will only drive inovation into finding some “Alternatives” that actually are viable rather than the electric, wind and solar that are promoted now.

    To afford to invest in these things you need capital. The Nationalised Oil producing Nations have drained all capital away and cannot even afford to keep pace with maintenance. They do have alot of nice new weapons for their military though. A perfect example of why all non-free market central planning solutions are doomed to fail.

    Do you think the hugely indebted will solve the alternative energy puzzle before a thriving cash flush, free market will? A market that cares about the enviroment they live in.

    Here is an example of a debt free province that ” is” investing in inovation and new ways of doing things. http://www.oilsands.alberta.ca/about.html The Youtube is worth watching.

    Alberta has thousands of people working on these issues because we can afford to and we care about them.

    ” Over the next five years, Alberta is expected to invest $6.1 billion in green technology –more than all the other Canadian provinces combined.” http://www.oilsands.alberta.ca/cleanenergyfuture.html

    Ironic that the inovation is largely being funded by oil revenues.

  7. No, not ironic at all that it should be funded by oil revenues – that’s exactly what we should be doing, using the one-time only income from fossil fuels to invest wisely for a renewable, sustainable economy.

    The article makes my point on expensive oil because it’s actually a pretty poor article. Peak oil has nothing to do with running out, and everything to do with rising production costs. The easy stuff is gone, and we have the harder stuff like deep water oil and tar sands left. It’s about the end of cheap oil, not oil per se.

    The article you’ve quoted hasn’t understood this, and neither have you. Your first comment mentions how peak oilers “believe oil will rapidly run out”. Not so.

    Here’s an introduction if you’re so inclined:

    http://makewealthhistory.org/2008/09/25/what-is-peak-oil/
    http://makewealthhistory.org/2008/09/25/when-will-the-oil-run-out/

  8. Cheap and easy are relative terms. Dependent on market forces and technology. Both of which are rapidly changing. I really don’t see cause for alarm about peak oil.

    I think you missed the point that higher prices will not only allow for the extraction of other forms of energy but will also help drive the investments in alternative energy you seek. Both can be persued without bankrupting ourselves.

    I’m glad you agree that the Alberta example of green investment is sound. Almost no one hears about how Alberta is also the green investment giant of Canada.

    It irks me alot that the anti oil activists seem to only ever tell a part of the story.

    1. Do higher prices drive investments in alternatives? Absolutely. But how long does it take for the alternatives to come online? You have to start ahead of time rather than wait for the crisis. That’s why this matters – because oil spikes cause recessions, and in recessions, nobody has money for investment. Oil depletion has to be planned for, it cannot be left to the markets alone.

  9. ” You have to start ahead of time rather than wait for the crisis.”

    We have “started ahead of time”.Unless you have a time machine and can travel back in time you cannot start further ahead of time than now.

    We have a few centuries of oil to go before there’s any crisis. If we havn’t found any viable alternatives by then they likely won’t ever be found.

    I disagree with your idea that markets cannot invest in times of reccesion. Alberta has because we planned for it. The boom and bust cycle is well understood by Albertans and the provincial government.

    I also disagree with the idea that you need more intervention to plan for the future. Again Alberta has and is planning for the future by allowing industry to look for realistic solutions. Even during a reccesion we are investing and planning without going into debt.

    The role of government is to support and incentivise industry led inovation, not to try and manage or direct it. The best and brightest people are in industry not government.

    The proof of less intervention and planning by governments working is that Alberta is investing more than all the other Canadian provinces combined. Despite having a tenth of the population.

    With government less really is more.

    1. “We have a few centuries of oil to go before there’s any crisis”

      I see my point about production flows has gone completely over your head. You can go back and read my first reply to you, and then let’s stop wasting each other’s time.

      1. And i see the evidence has once again gone over yours. Your production flows “Point” is based on a report about “What If” scenerio’s not facts.

        You simply do not understand that there is no “shortage” of production. You also seem unwilling to accept that we have the ability to increase production to increased demand, we do. China is not investing billions into Alberta only to “Withdraw” a dollar a day. They are not stupid.

        Conservative estimates are that there will be over 200 billion invested in the next 20 years. Production will double in 7 or 8 years. With China willing and able to supply skilled workers and capital these estimates are likely “very” conservative to say the least.

        They are also doing the same all over the world, so any arguments Alberta alone cannot avert peak oil is a moot point.

        The rate of technological advance in exploration and extraction has far outstriped production. This is why proven reserves keep increasing not decreasing as does the ability to produce them.

        Not facing the facts is what wasting time.

        1. If you’ve got a problem with my use of the data, I suggest you take it up with the Canadian Association of Petroleum Producers, where I got it from.

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