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Peak Oil Flip-Flop
National Geographic ^ | April 10, 2013 | Bill Chameides

Posted on 04/14/2013 10:46:26 AM PDT by nickcarraway

There’s a new twist in the “peak oil” debate. Is it good news for the climate?

Peak Oil Question Remains, Debate Continues

Ever since M. King Hubbert advanced the theory of peak oil in 1956, experts and non-experts alike have been debating about timing and relevance. (See here, here, here and here.) Hubbert’s argument seems like a no-brainer. Oil is a finite natural resource, so there must come a time when oil production peaks and begins to decline. The question is, when? And for a world economy that is largely fueled by oil, that “when” question is quite germane. If peak oil hits while oil demand is rising, it could spell worldwide economic disaster.

The world of oil punditry is replete with predictors of an imminent arrival of peak oil. (See here, here, here and here.) Folks bullish on oil, on the other hand, have long held that that time is way in the future, that there is plenty of oil in the ground and that whenever supply begins to be outstripped by demand, new technologies will be developed to get at what had been deemed to be economically unrecoverable.

History Shows That When Oil Prices Rise, Oil Production Responds

The historical verdict, so far, seems to be in favor of the oil industry bulls. Each time dwindling supplies and/or surging demand have caused oil prices to rise, the economics of high oil prices have spurred the development of new sources to quell the imbalance.

The latest ups and downs in the economy and the oil industry seem to follow that scenario. Remember the skyrocketing gasoline prices of 2005 and 2006 before the July 2008 peak? As in previous oil shocks, there were warnings that peak oil had arrived and that we should all get ready for even higher prices at the pump.

But that didn’t happen. First we were “saved” by the economic crash of 2008 — which some argue was actually “a direct result of peak oil.” The crash caused demand for oil and therefore prices as well to fall. Lots of folks, myself included, assumed that the reprieve from the economic slowdown was temporary and that oil prices would rise, possibly even more sharply than before once the global economy got going again.

(Source: U.S. Energy Information Administration)

Fortunately that hasn’t happened. The economic recovery, while tepid, is underway. And while oil prices have recovered somewhat, they have not hit the July 2008 peak, let alone shot above it. (See related: “Outlook for U.S. Gas Prices: A Bit Lower This Summer“)

So what’s going on? As you might expect, there are a variety of opinions. Some continue to warn that a spike in prices at the pump is just around the corner — for example see these predictions (here and here).

Others claim that we are seeing the same demand-and-supply response that we’ve seen in the past. The runup of oil prices in 2007 and 2008 sparked new investments that have increased production and moderated prices. And this argument is supported by data showing an approximate 10 percent uptick in world oil supplies since 2009.

A New Paradigm Proposed

But now two new reports — “Global Oil Demand Growth — The End is Nigh” by Seth Kleinman et al. of Citigroup and “The End of an Era: The Death of Peak Oil” [pdf] from Robin Wehbé et al. of the Boston Company — argue that something entirely different and rather unprecedented is underway. Both reports argue that we have entered a new era, one characterized not by the spectre of a supply peak, but by a demand peak that will assure that demand will not outstrip supply for quite some time to come.

The reasons for peak oil demand:

Fuel economy. Recall the new fuel efficiency standards (known as CAFE, short for corporate average fuel economy) promulgated by the Obama administration with the support of the automotive industry? They will certainly have a moderating influence on U.S. oil demand. But the United States isn’t alone. Fuel economy standards are tightening throughout the world, including in China, the European Union, Japan and Canada. Fuel efficiency is expected to rise for trucks as well. The net result — global fuel efficiency on cars and trucks, which has languished for decades, will increase annually by about 2.5 percent. Substitution of natural gas for oil. The authors project that the revolution in natural gas supplies wrought by shale extraction will have a major ripple effect on the oil industry. Huge new supplies of natural gas [pdf] will continue to lead to low prices in natural gas and that in turn will lead to substitution of natural gas for oil. (Indeed this has already begun.) As a result. we’ll see a shift in the following: Transportation, especially for trucks and other large vehicles currently powered by diesel. Power generation. Though not very common in the United States, oil is still used to generate electricity. For example some 8 percent of New York State’s electricity is generated from oil, and in 2008, worldwide, about a trillion kilowatts of electricity (out of a total of 19 trillion kilowatts) was generated from oil. Kleinman et al. predict that is about to change as old oil-fueled power plants are replaced by gas-fired ones. Petrochemicals too. Currently the petrochemical industry primarily uses oil as a feedstock. But natural gas, especially so-called wet gas, contains ethane, which can also serve as a feedstock for chemical synthesis. Low natural gas prices have already begun the substitution that the authors predict will accelerate into the future. Of course for this to happen on a global scale, natural gas must become a global commodity that can be traded and transported from producing regions to consumers. No problem, say Kleinman et al. — the answer will be liquid natural gas (LNG). They opine:

“[O]nce the next wave of LNG export projects comes to market … global LNG markets should loosen materially. This raises the prospect of lower spot prices, and a greater incentive for gas for oil substitution to spread and accelerate globally. Hence, the assumption that substitution outside of the US starts to accelerate post 2016.”

But that’s not all. The Boston Company goes even further, arguing that the emergence of peak oil demand is being also driven by an unprecedented shift in consumer behavior. For years the accepted wisdom has been that consumer demand was inelastic with respect to price — in other words, even if prices change, demand remains much the same. The Boston Company report points to data since 1970 showing that each time the price of oil rose above 3 or 6 percent of gross domestic product, demand was reduced or quickly curtailed. Thus, they argue, price, not supply, now limits demand.

Suffice it to say — and I’ll note this is par for the course when it comes to the peak oil debate — not everyone agrees with these predictions (see chart).

Citigroup forecasts a very modest increase in demand that plateaus near 2020 (see also Fig. 1, page 2) while BP and the International Energy Agency (IEA) project a larger, steadily increasing demand of 0.7-0.8 percent. I expect the projected demand growth in the U.S. Energy Information Administration (EIA) forecast will be revised downward in the report due out this spring. ExxonMobil projects a 1.5 percent annual increase in demand from 2010 to 2025. (See End Note for sources.**)

Could Climate Be a Winner?

At least on the face of it, the projections of Citigroup and the Boston Company if they pan out would be good news for the climate. The world is replete with hydrocarbons and it may very well be true that, as the oil bulls have been telling us, technological innovation will make it possible for us to economically pull all the hydrocarbons in their various forms out of the ground to burn them if we so choose. And it certainly seems like advances in fracking and horizontal drilling have moved us a big step closer in that regard.

The questions we should be asking ourselves are: Do we want to pull all this stuff out of the ground, and How much is too much before the climate price is too dear to pay for cheap oil?

The fact that oil demand may be flattening out is a positive sign for the climate; at least the near-term pressure to pull all the oil out of the ground as fast as possible has lessened. (A caveat here: some of the oil demand flattening is due to switching from one fossil fuel — oil — to another — natural gas, which while cleaner than oil, still puts carbon dioxide in the atmosphere when burned.)

Interestingly enough, this peak oil demand phenomenon, if it comes to pass, will have occurred of its own accord without a global accord on carbon emissions. Is the system somehow correcting itself on its own? If so, the “system” better get busy because there’s a lot more to do — not just flattening demand but actually turning the demand curve downward, and not just for oil but for all hydrocarbons. Tall order. Maybe the “system’s” response will be to engineer a global climate treaty. And if that happens, who gets the credit?

__________________ End Note ** Sources for chart: “Global Oil Demand Growth — The End is Nigh,” Seth Kleinman et al., Citigroup, March 2013. Energy Outlook 2030, BP, January 2013 (data [xls]). North America leads shift in global energy balance, IEA says in latest World Energy Outlook, International Energy Agency, November 2012. “International Energy Outlook 2011,” U.S. EIA, September 19, 2011. “The Outlook for Energy: A View to 2040,” ExxonMobil, 2013.


TOPICS: Business/Economy; Extended News; News/Current Events
KEYWORDS: fossil; fuels; gasoline
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1 posted on 04/14/2013 10:46:26 AM PDT by nickcarraway
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To: nickcarraway

“The questions we should be asking ourselves are: Do we want to pull all this stuff out of the ground, and How much is too much before the climate price is too dear to pay for cheap oil?”

Bugger off Bill!


2 posted on 04/14/2013 10:57:04 AM PDT by Dr. Bogus Pachysandra ( Ya can't pick up a turd by the clean end!)
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To: nickcarraway

There is more oil here than ever imagined before. The amount of fuel in the ground must have doubled since the last time they were talking about peak oil. It looks like they are trying to manipulate market and politics with the new peak oil effort.


3 posted on 04/14/2013 10:57:08 AM PDT by mountainlion (Live well for those that did not make it back.)
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To: nickcarraway
Hubbert’s argument seems like a no-brainer. Oil is a finite natural resource, so there must come a time when oil production peaks and begins to decline.

It seems like a no-brainer most especially if you don't have a brain. How do we know it's a finite natural resource? We don't even know where it comes from. It could be forming all the time, for all we know.

4 posted on 04/14/2013 11:09:37 AM PDT by SamuraiScot
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To: mountainlion

It looks like they are trying to manipulate market and politics with the new peak oil effort.

Supply + Demand = What?

And lookie who who funds "they":

====================

So, who are these guys at the NRDC? Well, it’s an interesting list.

Natural Resources Defense Council Board of Trustees

Chairman

Frederick A. O. Schwartz, Jr.

Partner, Cravath Swaine & Moore; (a British Law Firm) Former New York City Corporation Counsel (under Mayor Ed Koch)

Executive Director

Frances Beinecke

Co-founder, The New York League of Conservation Voters (with RFK Jr.)

Trustee

Laurance Rockefeller

Private philanthropist; Former Chairman, Rockefeller Brothers Fund; Former chairman, Citizens Advisory Committee on Environmental Quality; Trustee, the Laurance Rockefeller Charitable Trust

Trustee

Thomas A. Troyer

Partner, Caplin & Drysdale; Former Chairman, the Foundation Lawyers’ Group; Former member of the IRS Commissioner’s Advisory Group on Tax-exempt Organizations; (no conflict of interest there?) Board member, the Carnegie Corporation of New York

Pres & Co-founder

John H. Adams

Former Assistant US Attorney (New York)

Vice Chair

Adam Albright

Board member, Redefining Progress; Board Chair, Population Communications International; Program Chair, Conservation International

Vice Chair

Alan Horn

Chairman & Chief Operating Officer, Warner Brothers

Vice Chair

Burks Lapham

Chairman, Concern Inc.; Director, Chesapeake Bay Foundation (a relatively benign group)

Vice Chair

George Woodwell

Founding Director, Woods Hole Research Center; Co-founder, Environmental Defense Fund (they banned DDT, Alar, etc.)

Co-founder & Treas

Richard E. Ayres

Partner, Howrey & Simon; Former Chairman, National Clean Air Coalition

Trustee

Patricia Bauman

Member, Pew Environmental Health Commission; Former Manager, National Institute for Environmental Health Sciences; Co-Director, The Bauman Foundation

Trustee

William Richardson

Former US Secretary of Energy; Former US Ambassador to the United Nations; Former US Congressman (D-NM)

Trustee

Michael Finnegan

Managing Partner, J.P Morgan Securities

 

Is this "Natural Resources" defense, or natural resource SUPPLIERS defense?

Now, let’s look at who gives the NRDC money, shall we?

Top Funders of NRDC

Funder

Total Donated

Comments

Descriptions in bold are major energy investors

Pew Charitable Trusts

$11,568,000.00

Sunoco money

Blue Moon Fund

$7,818,735.00

This is W. Alton Jones Money (Citgo)

Energy Foundation

$6,965,000.00

Launched by The John D. and Catherine T. MacArthur Foundation, The Pew Charitable Trusts, and The Rockefeller Foundation. The Joyce Mertz-Gilmore Foundation joined as a funding partner in 1996, and The McKnight Foundation joined in 1998. In 1999, The David and Lucile Packard Foundation joined to support two programs: the U.S. Clean Energy Program (now the Climate Program) and the China Sustainable Energy Program. In 2002, the William and Flora Hewlett Foundation joined to support advanced technology transportation and clean energy for the West.

John D. & Catherine T. MacArthur Foundation

$5,636,500.00

Bankers Life and Casualty money (investment portfolio unknown)

U.S. Environmental Protection Agency

$4,681,097.00

Your tax dollars at work subsidizing the interests of whom?

Turner Foundation

$3,795,167.00

CNN, and a lot more

Public Welfare Foundation

$3,500,000.00

Too confounded to determine

Joyce Foundation

$3,309,445.00

Timber Wealth

Charles Stewart Mott Foundation

$3,022,340.00

General Motors

Ford Foundation

$2,733,300.00

Ford

Beinecke Foundation

$2,150,000.00

Major player at Yale.

J. M. Kaplan Fund

$2,057,500.00

William Bingham Foundation

$1,995,000.00

Homeland Foundation

$1,733,000.00

San Francisco Foundation

$1,654,739.00

Rockefeller Brothers Fund

$1,377,510.00

Them again

McKnight Foundation

$1,365,500.00

Robert Sterling Clark Foundation

$1,310,000.00

Geraldine R. Dodge Foundation

$1,310,000.00

Bauman Family Foundation

$1,226,000.00

Nathan Cummings Foundation

$1,220,000.00

Educational Foundation of America

$1,210,000.00

Richard & Rhoda Goldman Fund

$1,205,000.00

Mertz Gilmore Foundation

$1,201,000.00

Carnegie Corporation of New York

$1,200,000.00

Park Foundation

$1,198,010.00

New York Community Trust

$1,186,821.00

Overbrook Foundation

$1,182,585.00

Surdna Foundation

$1,147,000.00

Bullitt Foundation

$1,122,675.00

William & Flora Hewlett Foundation

$1,075,000.00

Note also the participation with the Energy Foundation

Quod erat demonstratum.

Most, if not all of these people at NRDC are energy investors.

=================

http://www.wildergarten.com/wp_pages/articles/nrdc_energy_racketeering.html

(with the usual Kudos to FReeper Carie Okie)

5 posted on 04/14/2013 11:09:44 AM PDT by TArcher ("TO SECURE THESE RIGHTS, governments are instituted among men" -- Does that still work?)
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To: nickcarraway

If you ever wanted proof positive that liberals are a stupid and unscientific lot all you got to do is dig up all the dire predictions about “Peak-Oil”. These are same people who warned about the impending global ice age in the 70s and then switched global warming in the 90s. Every single prediction they have made has turned out wrong. I would rather take financial advice from the local Arby’s cashier than listen to liberals on any matter of importance.


6 posted on 04/14/2013 11:12:04 AM PDT by 3Fingas (Sons and Daughters of Freedom, Committee of Correspondence)
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To: mountainlion

Does the author get paid by the word? We need to burn more oil to get the temperatures back up. The last warm year was 1999 and most would say this has been a very cold year. Peak oil went out the window a decade ago and with the Dakota finds and now new southern states finds peak oil is obsolete.


7 posted on 04/14/2013 11:13:34 AM PDT by mountainlion (Live well for those that did not make it back.)
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To: nickcarraway

Fifteen years ago I dumped my National Geographic Society membership (after 30 years of being a member) because I could not stomach the man made global warming crap they were feeding their members.


8 posted on 04/14/2013 11:15:53 AM PDT by RightWingConspirator (Obamanation--the most corrupt regime since Robert Mugabe's Zimbabwe)
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To: TArcher
Never heard of the NRDC. Opec has been running the oil industry world wide with the help of socialist presidents here. Obama/Salazar shut down oil production on government land and that was only broken up buy the Dakota oil finds and fracing bringing us cheap natural gas which cut off the high priced OPEC oil. Obama doubled the gasoline price by his policies.
9 posted on 04/14/2013 11:34:49 AM PDT by mountainlion (Live well for those that did not make it back.)
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To: nickcarraway
But now two new reports — “Global Oil Demand Growth — The End is Nigh” by Seth Kleinman et al. of Citigroup and “The End of an Era: The Death of Peak Oil” [pdf] from Robin Wehbé et al. of the Boston Company — argue that something entirely different and rather unprecedented is underway

Two other reports to consider:

1. BP predicts US energy independence by 2030 at: http://www.bp.comextendedsectiongenericarticle.do?categoryId=9048887&contentId=7082549

2. The Green River Formation: World's Largest Oil Shale Deposits

www.thenewamerican.com › Sci/Tech › Energy May 15, 2012 – The Green River Formation of Utah, Wyoming, and Colorado may hold more oil than the rest of the world put together: an estimated three trillion ...

http://energy.usgs.gov/OilGas/UnconventionalOilGas/OilShale.aspx

10 posted on 04/14/2013 11:35:24 AM PDT by spokeshave (The only people better off today than 4 years ago are the Prisoners at Guantanamo.)
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To: mountainlion

>>Obama doubled the gasoline price by his policies.

Don’t forget to factor in the speculative effect of QE1,2,3...{ ad infinitum } Benny Bernankie Inflat-O-bucks.

Physical demand is relatively static - Cyberian demand, being manufactured within the domain of the same jackwagons who funneled all that AAA A$$paper through their systemically corrupt pipeline, not so much.

http://www.google.com/#hl=en&sclient=psy-ab&q=Oil+speculation+site:www.zerohedge.com


11 posted on 04/14/2013 11:47:23 AM PDT by TArcher ("TO SECURE THESE RIGHTS, governments are instituted among men" -- Does that still work?)
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To: TArcher
Supply + Demand = What?

I never saw supply and demand added together before. They are opposing forces and are usually graphed on different axis. Supply goes up, price goes down. Obama cut the local supply to OPEC got a bigger share of the pie. The US people end up giving more money to OPEC.

12 posted on 04/14/2013 11:57:17 AM PDT by mountainlion (Live well for those that did not make it back.)
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To: mountainlion

>>I never saw supply and demand added together before.

http://en.wikipedia.org/wiki/Supply_and_demand

And what’s water going to cost after the ground water is all fracked up?

“oops”


13 posted on 04/14/2013 12:00:47 PM PDT by TArcher ("TO SECURE THESE RIGHTS, governments are instituted among men" -- Does that still work?)
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To: mountainlion
>>We need to burn more oil to get the temperatures back up.

Silly AGWist -- tell that to the Dinosaurs who used to live in the Tropical Gunnison Valley.

http://www.google.com/#hl=en&sclient=psy-ab&q=Gunnison+River+Tropical+Dinosaurs

See Spot.
See Spot Hide.
Where's Spot?

Brrrrr.

14 posted on 04/14/2013 12:09:29 PM PDT by TArcher ("TO SECURE THESE RIGHTS, governments are instituted among men" -- Does that still work?)
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To: TArcher
And what’s water going to cost after the ground water is all fracked up?

“oops”

Our liberal governor here in Colorado drank some fracking fluid at a press convergence so it was not that bad. Frackiong for natural gas has liberated millions of cubic feet of otherwise unaddressable gas dropping the price of natural gas which was a good thing, supply went up and price went down. There have been several water wells fracked around here and no one has complained once.

15 posted on 04/14/2013 12:10:18 PM PDT by mountainlion (Live well for those that did not make it back.)
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To: mountainlion

The only thing that proves is that Chickenlooper is a liberal Useful Idiot.

Almost as silly as your AGWist assertion that human induced carbon emission can warm the planet.

Try harder.


16 posted on 04/14/2013 12:13:56 PM PDT by TArcher ("TO SECURE THESE RIGHTS, governments are instituted among men" -- Does that still work?)
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To: TArcher

My family has only been in Colorado 150 years so it was not them that killed off the dinosaurs.

The last “hot” year was 1999 and it has cooled much since we have been forced to use less “carbon” to save the world. Someone over did it and were seem to be headed to an ice age quicker because of it.


17 posted on 04/14/2013 12:21:16 PM PDT by mountainlion (Live well for those that did not make it back.)
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To: mountainlion

“There have been several water wells fracked around here and no one has complained once.”

Not once you say?


Hydraulic fracking linked for first time to groundwater pollution
By Mark Jaffe
The Denver Post
Posted: 12/09/2011 01:00:00 AM MST

http://www.denverpost.com/business/ci_19502307


“Oops”

Listen, hear that gurgling sound? That’s your credibility circling the toilet bowl.


18 posted on 04/14/2013 12:27:39 PM PDT by TArcher ("TO SECURE THESE RIGHTS, governments are instituted among men" -- Does that still work?)
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To: nickcarraway

Not only has the writer bought the whole glo-baloney warming nonsense (and not heard the news a few weeks ago that temps have been flat the last couple of decades), but he apparently didn’t hear of the abiotic oil theory, which mechanisms the Soviet scientists concluded over 60 years ago were the source of oil. Hydrocarbons formed in the upper mantle (far below the 18,000ft depth where organics have been found) that migrate towards the surface. Calcium carbonate, extreme pressure, heat and viola! You’ve got oil!


19 posted on 04/14/2013 12:31:11 PM PDT by curious12
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To: mountainlion

Someone over did it and were seem to be headed to an ice age quicker because of it.

There you go with those silly AGW assertions again.

 

 


20 posted on 04/14/2013 12:31:16 PM PDT by TArcher ("TO SECURE THESE RIGHTS, governments are instituted among men" -- Does that still work?)
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