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Peak Energy, and Limits to Growth in Australia

mike's picture

One hundred years ago today (as I write this in late May), sulfur fumes permeated the air at Masjid-i-Suleiman. A good sign indeed for an experienced oil hand like Reynolds. At 4 am, the drill reached 360 metres under the desert sand, and struck oil. A gusher, 25 metres high, shot into the air. Arabian oil was born.

The site was so remote that it took five days before D'Arcy got word by telegram in England. "If this is true," he replied, "all our troubles are over." It was indeed true, and more rigs hit oil elsewhere in Persia, including another huge one in September.

How things have changed. Whatever happened to telegrams? Whatever happened to the oil?

The 20th Century will undoubtedly be remembered for the explosion of technology, steam, then oil, then nuclear and solar powered technology. I stress, powered technology. Most people confuse technology with energy, and unfortunately, they are not interchangable, something fast becoming obvious as we approach the 21st Century era of Peak Energy and limits to growth.

There is so much nonsense in the media today about the reasons why petrol (and diesel of course) is so expensive, it's mind boggling. Surfing the media's web blogs' tailing articles on petrol prices quickly exposes the man in the street's ignorance of the truth. Not that we can point the finger at 'people', the media (outside of publications like this one) is doing very little to educate or inform their readers or viewers.

So, when I prophesise that within as little as four or five years we may not be able to buy any fuel at all, at any price, people of course think I'm a complete nut case. I can understand this. The government is hardly showing signs of any such concerns, when they propose to build new freeways and tunnels to the airport!

Peak Oil is often misconstrued as 'running out' of oil. In fact, it's 'only' the point at which roughly half the oil has been extracted. This has been thoroughly documented in the USA which was by far the largest oil producer until after WWII. That nation peaked in 1971, and even though the largest oil field in all of North America (Prudhoe Bay) was put into service shortly thereafter, the US' oil production never recovered, inexorably decreasing to its current level, slightly less than 50% of peak. Peak Oil is no theory, the American experience proves this beyond any doubt.

So what of Australia? The news, I'm afraid, is grim indeed. Australia's oil production peaked in 2000. The Australian Bureau of Agricultural and Resource Economics (ABARE) has, for reasons known only unto itself, consistently mispredicted our future oil production. This is most baffling. Just who are they trying to kid? Do they pick figures out of thin air? Senator Milne and Ian Dunlop, formerly an international oil, gas and coal industry executive, now also challenge our resources peak body for misleading everyone, not just once, but at least five years running. This, in my opinion at least, borders on criminal negligence. One has to realise that very important decisions are made on the back of these predictions, like enlarging airport runways.

When a nation's oil production peaks, it must then rely on importing from somewhere else. The US imports oil from Canada, Mexico (now collapsing), and Venezuela, with some top up from the Saudis and Africa. We in Australia, you may be surprised to find out, import oil from Vietnam, PNG, the United Arab Emirate, Malaysia, Brunei, and, as a further surprise, New Zealand. We actually get more oil from NZ than we do from Saudi Arabia. http://anz.theoildrum.com/node/3657

There is a problem with importing oil from less developed nations. They want what we have, and are developing at an accelerating pace. Since Vietnam is our biggest single supplier (currently 28% of all imports), let's analyse their situation.

Vietnam's oil production, which did not start until 1986, steadily rose to a peak of just over 400,000 barrels/day in 2004. It has been in decline ever since. Its domestic oil consumption, also rose very quickly and in unison to 275,000 barrels/day (in 2006) as that country's economy grew at a mighty 7.1% annually, a doubling of GDP (and by definition, consumption) every ten years. By now, production is probably down to 300,000 barrels/day, and consumption is up to about........ 300,000 barrels/day!

Data for the above from http://tonto.eia.doe.gov/country/country_energy_data.cfm?fips=VM

So where's our oil going to come from now? And how dare they use it all up! Vietnam's nett oil export is now in virtual freefall from 175,000 barrels to 90,000 barrels/day in a matter of just five years. At the time of writing (I do not have current figures) it might be possible that like Indonesia (which has just left OPEC - remember, OPEC is for Oil Exporting Countries!) Vietnam has become a nett oil importer, just like us. Martin Ferguson worries about a deepening trade deficit of some 25 billion dollars from importing oil, but I worry about there being none at all left to buy.

There is not the room here to analyse what is happening to the other nations we import from, but I can tell you that apart from the UAE (representing just 12.5% of our imports), the picture is similar everywhere, including Saudi Arabia. Oil exporting nations are falling like dominoes, and soon there will be none to turn to. Within five years from now, unless another Bass Straight is found, Australia will be left with a mere 10% of the oil we now take for granted, and it might in fact be less.

Now we might find another Bass Straight, but you have to understand that even if another 250,000 barrels/day of Australian oil comes on line over the next five years, we would still only have about one third of what we currently take for granted.

This is not the time to build new freeways and tunnels to airports (which may even be quasi abandoned within five years as airlines all over the world go belly up), what we need is a major effort to build new rail infrastructure, and other associated public transport. I see no other option but to start rationing fuel, and fairly soon, allowing essential services like farming, medicine, fire brigade and so on to continue operating. Time is short, we must act now. We need visionary leadership.

Suggested reading:
http://anz.theoildrum.com/node/3657
http://www.futurescenarios.org/
http://www.peakoil.org.au
http://groups.yahoo.com/group/roeoz/
http://permaculturenoosa.com.au/
http://austlii.law.uts.edu.au/au/legis/cth/bill_em/lfeab2007303/memo_0.html

Mike Stasse is a Sustainable Housing and Energy Efficiency consultant and an accredited BERS energy rating technician. He lives with his wife in the Noosa hinterland at Cooran in their Award Winning eco solar house.

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Comments

This was posted by Judy Bamberger (bamberg[AT]eaglet.rain.com 02 62476220) to her local newspaper.

While our politicians contest who can spit the dummy further over petrol-related taxes, they drive and fly, fly and drive, burning oil at unsustainable rates. Australians consume nearly 50% more oil than the average, nearly 10-times than our nearest neighbour, Indonesians, 50% more than Brits.

While we whinge about the price of petrol, we consume oil excessively. Price-per/L is a miniscule percent of per-capita income, far less than about 80% of other nations, six times less than Indonesia, about 50% less than the UK.

Our politicians waste energy, media, time, and oil arguing and blaming each other, concocting tax-saving stunts. And the price of oil (and petrol) rises. The GST on the excise tax (3.8-cents/L), the excise tax (38-cents/L), GST entirely (16-cents/L) - even if we cut all these, barely 50-cents, economists predict the price of petrol will exceed AU$2.00/L by year-end.

Since 2001, oil increased five-fold (US$25/bbl to US$130/bbl); at the bowser, prices have barely doubled.

Wake up, Australia: The price of petrol is high, and it will go only higher. As much as it pains our pocket books, we pay the average world-wide price; half what many Europeans pay.

"It's the law of supply and demand, stupid," as the saying goes. You want to spend less on petrol? STOP DRIVING.

denis's picture

Oil is an exhaustible natural resource. The easy to extract and process half has already been burnt in a short period of time. There is plenty of talk about 'supply and demand' but little mention of the fact that geophysical factors have an increasingly strong influence on supply. There is plenty of speculation on why the price of oil has risen so strongly but little on the fact that exploration and extraction costs have also risen very rapidly. The industry have to face that supply reality, though, of course, they say little about this in case it depresses their shareholders. The days of 'cheap oil' are over. That is the reality even though our leaders are not prepared to face it - publicly.

As long as we press our noses up against intensely selective and highly suspect sources of information, we will continue to fail to engage with the wider picture.

I have read fairly widely about peak oil and associated issues and my conclusion is that you guys are over-focused and, therefore, easily manipulated. You are in good company; about 6 billion people are doing likewise; that is, when three of those billions can take their minds off hunger long enough to think at all.

A word of warning, which I am sure you all know, but never apply… never believe anything said to you by the mass media, corporations, banking interests, the UN, academia or scientific institutions. In case you haven't noticed, all of these are now controlled by the same banker conglomerates who fund and administer the WTO, the WB, the IMF and the BIS. They are not your friend; and in fact that sector of the population that I would describe as wide awake, would identify this group as humanity's number one enemy. I refer, of course, to the Hills Samuel/Rothschild/Rockefeller led groups.

Peak Oil Alarmism?

Back to oil:

Sources I am more inclined to take seriously are individuals who are non-aligned, and who slip their esoteric knowledge out to those prepared to search for it. However, these people have widely divergent views. At one end of this spectrum we have peak oil alarmists (who may or may not be right). At the other we have the 'she'll be right' brigade. The reality is, there is not enough empirical data available to draw a firm conclusion. The whole issue is just not as simple as most would portray. For example, four of Russia's top geo-scientists joined others around the world to argue that oil is not fossil-based, but magma-based; and therefore, renewable. I must admit this leaves me incredulous, but I have learned to keep an open mind; especially as I am not aware of a single credible report on oil that correlates with others.

Meanwhile, there are more urgent matters at stake. If I recall the figures correctly, 70% of the current oil price is set by the NY futures market. This is insane, and has nothing to do with supply or other quantitative issues. Secondly, I am aware of literally hundreds of wells sunk in and around Australia that were qualified by geophysicists prior to shafting, and simply capped without testing. I got this from several individual drillers. I believe them; I do not believe the corporations or government. Moreover, 70% of the world's current oil is not pumped by the great oil companies, but by national interests; often government-owned. Their prices are low. In other words, the oil prices we hear quoted are first world globalised nations only.

Thirdly, our bass Strait diesel requires only filtering. It is high quality and cheap. Why is it higher priced than petrol?

Official figures show only one third of our oil is imported. My challenge to you guys is to identify the tankers that bring this here; and their manifests. The word I got from inside is that most imports are on paper only.

The necessisity for the resoration of tariffs

Finally, and most significantly, why did we ever sign the Oil Price Parity Agreement; wherein we have paid foreign prices for Australian oil. And of course, why do we not revoke this criminal piece of nonsense now?

By calculating our actual production costs, relative to Venezuelan, I estimate that our bowser price (sans tax) should be 12 cents per litre (Venezuela is equivalent to 6 cents). The savings generated by such a rationalisation would quickly pay for a pan-Australian standard rail system and saturation public transport. Our oil requirements would then fall dramatically. A second tier of savings could then finance alternative energy and technology research and development.

This, I believe is the direction we should be headed. In terms of current knowledge, it is feasible, economically viable and self-regulating, and addresses economic realities.

However, there is one exception. This will not be implementable, not will it be realistically utilisable, if we do not first restore tariffs. This is because the prime regenerative beneficiaries will be the manufacturing and family farming sectors. Tariff removal destroyed two thirds of our family farms and almost half of our manufacturing over a period of two and a half decades. This also cost three million full time jobs. Simply put, tariff restoration would regenerate all of these, and it would also cause a massive decline in imports, which would make UN/US-generated trade reprisals ineffective.

A bonus would be the creation of a firewall against imported recession. Incidentally, we need to do this anyway because Australia's imports are around 30% higher in value than our exports; which means we are already bankrupt and almost in the clutches of a foreclosing World Bank.

A final thought, to inspire urgency; the US has been reducing imports from China now for a year. This means our exports to China have been falling in tandem (as they must). Our politicians have been lying to us. We are now looking down the barrel of depression; especially if you consider government still has liabilities of 500 billion in unsecured/uncovered public service superannuation liabilities. Only the proposals I outlined can save us from that. So it is really just Hobson's choice.

I know nix about oil, so if any of you can proved evidence-based reasons why I should alter the above, I will be eternally grateful.

Hi Tony,

King Hubbert's calculations on oil peaks are proving more and more on the nose as time goes by. His calculations and others are explored by Seppo Korpela in the first edition of The Final Energy Crisis, Pluto Press, 2005. In the second edition, coming out in September, and edited by myself, he has updated his calculations, retesting the Hubbert theory, and this confirms that we are probably in or around the peak at the moment, using the best knowledge and opinions available. There are also two articles by Colin Campbell, who is an expert in reserve estimations and discovery trends. In the first chapter of The Final Energy Crisis, Ed.2, 2008, which I wrote, I have looked at other indicators of trends, including measures of economic growth, and I write about the per capita oil production trend. I also look at the theory of energy decoupling of the economy and find it wanting. Speculation must account for some of the dollar price, but not for the failure to make large new accessible discoveries sufficient to keep our overpopulated world in oil in the style to which it has been accustomed. There are numerous other indicators, but you will have to buy the book.
:-)

Sheila Newman, population sociologist
home page
Copyright to the author. Please contact sheila [AT] candobetter org or the editor if you wish to make substantial reproduction or republish.

mike's picture

Tony, rest assured I have a very robust bullshit filter. You have brought up so many issues to reply to it's hard to work out where to start, however, here goes.....

The empirical data may be neither complete nor accurate, but there is more than enough to allow one to draw serious conclusions. Like the fact the year the most oil ever was discovered was 1964...

Regarding the Russian Abiotic Oil, it really doesn't matter whether it's for real or not, it's plainly obvious the Earth is NOT creating 85 million barrels of the stuff every day to feed our habit.

Re speculation, to be sure there is plenty of that, but I put it to you that were it not for the fact oil supplies are ultra tight, there would be none. Remember the days of $20 oil? Speculators were buying and gambling on oil futures back then.... so why didn't the oil skyrocket way back then?

Do you have a source for your Bass Straight 'filtered diesel' statement? MY understanding is that this oil was actually too thin to make diesel with but was perfect for making cheap petrol (hence we export it!) but that we need thicker oil to make diesel, and import both that and finished fuel. I was told this a very long time ago as an explanation as to why diesel here is more expensive than petrol, which at the time was the complete opposite to everywhere else. One thing I don't understand properly is why diesel now seems to be dearer than petrol everywhere..... unless of course demand is skyrocketing because so many cars now run on it due to these vehicles being so much more economical than petrol ones.

After giving us a lecture on the credibility of sources you have the nerve to write "I am aware of literally hundreds of wells sunk in and around Australia that were qualified by geophysicists prior to shafting, and simply capped without testing. I got this from several individual drillers. I believe them; I do not believe the corporations or government."

I hear stories like this all the time too when I broach this subject. I have a source. My father worked for TOTAL FINA way back in 1963/64 - interestingly, the years the most oil was ever discovered globally - and you know what? They didn't find a single drop of oil..... NOT ONE. If all this oil was just sitting out there waiting for us to exploit, don't you think the time is ripe to pull some out at $100+ a barrel? Don't you think oil companies would be falling over themselves to sell us the stuff? I put it to you there may well be at least three factors at play here: no oil, crap oil, or very slow flow rates. It's a well known fact in the industry that currently 90% of drillings are wildcats, ie duds..... even in Saudi Arabia. I read this on the Oil Drum which I think is a pretty good source.

And finally, we probably signed the Oil Parity Agreement so we could get a high price (for then!) for the oil we were exporting. I think it's called Capitalism/Globalisation. Don't worry though, both are on the verge of collapse.

A pessimist is a well informed optimist

oziz4oz

Gidday Mike

I intuit that you have researched your subject thoroughly and drawn conclusions accordingly. This makes a wholesome change; because most people don't.

However, extrapolatory logic only works if you have all the data. This is a mathematical fact of life. As you yourself point out, empirical data is incomplete.

My background ranges from research and negotiation in industry, between cultures, and even in urban battlegrounds; as well as for governments. This has taught me much about the games people (corporations and banks) play, and where to look to sniff out the truth. Horribly unscientific, this is true, but I have been doing this successfully for some decades now.

Consequently, to demand credibility would be absurd. I do not attempt to persuade anyone towards anything. What I do is identify decent and intelligent people who are on the same page, and chuck templates their way which may well speed up the process of joining the dots. For others, who have already joined the dots, I try to save them time by drawing the lines.

Invariably, they all correct me on details, major and obscure, and then we all move on to action. Action is the bottom line.

Now back to your post...

Abiotic oil? Sure, I just wondered how far you had ranged.

The impact of speculators? Merkel has just demanded that this accounts for 25% of the cost per barrel, and that this market must be made illegal. Knowing her backers, I suspect she is well aware that this accounts for 70%, but is preempting with weak remedies that give the bankers and investors strategic breathing space. With typical lack of subtlety, the US Congress has been advised it is in fact 70%, but no action is proposed that I know of. Typical.

Diesel? Let me say first, that oil companies lie on principle. The only criterion is profits. So who cares what they say? And Oil Drum? It has a drum to beat alright. Peak oil. But back to Bass Strait Oil. I discussed this with men who worked on that job. They used the diesel straight from the ground on the company plant and machinery. The only problem with it was that it would eventually clog the fuel filters and obstruct injectors; but this took a long time to occur. 'Clean' diesel does this anyway, which is why all diesels have filters. There was also a small problem with bacterial build-up. In the big glass tank they used you could see this black shape "moving like an ET"; but bacterial infection is common to all diesel tanks, and additives stop this. On thinness? They mentioned nothing of this and used the diesel in their own private vehicles. Anyway, I don't see the relevance of thinness. If anything, this means less work on the fuel pump and injectors, and higher revs. Peformance should be enhanced and higher speeds achieved. In other words, our diesel must be more energy-efficient, and with higher operating temperatures, would be less polluting.

As to the reason why diesel is more expensive than petrol, I have no idea. I suspect it is to discourage use of diesel motors and force motorists on to petrol.

On the rest? I merely report what people tell me, but some of those drillers had been known to me for some years and had earned my respect.

Whereas logic says oil, like any other earthly resource is finite, this does not meant it is running out now. I think the oil companies are forcing optimising of profits so that shareholders will be satiated, whilst capital is still available for research and development into other technologies and energies. In fact, the Rockefellers have just split their board governor and CEO positions to ensure both objectives are advanced objectively. I hear whispers other oil companies are doing likewise.

This is all very well, but it does not address the billion or so people who will die of starvation or malnutrition-sourced diseases over the coming year. The price of fuel must come down and I argue it can be done. If Rudd commands it, how can the oil companies refuse. But then I also argue that Rudd is a clone of Howard and is working for the enemy.

I am aware of other greater factors in the food shortage; eleven in fact, and I will write about these in other threads. But thanks for your engagement in this debate, Mike. Your points have been absorbed. Now what?