It appears that a lot of people are waking up to the fact that energy is THE BIG TOPIC of the day, and there are more and more stories coming out that all point to something major under way.
I'll quote the FT for most stories, to underline the fact that they have been very active on this topic and because I actually read the paper version every morning, but you can find similar stories in other outlets.
- a great primer on the natural gas situation
- China exploring coal-to-oil options - 24 billion $ of it
- the oil industry has failed to bring 2 mb/d of oil capacity due to incompetence
- energy efficiency suddenly coming on the international agenda
- oil workers killed in Iraq
First of all, I have been promising you guys a natural gas diary for a while. This isn't it, but let me point you to soemone else's version, which is a must read, from an industry publication, Energy Pulse:
Natural Gas and Oil Outlook - How Serious are the Problems? Part 1
Natural Gas and Oil Outlook - How Serious are the Problems? Part 2
Natural gas and oil production will decline significantly in coming years. The timing and rate of decline is uncertain, but there is no doubt that the decline will begin before most people are ready to deal with it.
NG and oil prices will be very volatile in coming years.
- We will see significant price increases and possibly shortages during periods when demand exceeds supply. Price spikes could be extremely high by historical standards because much of the demand is highly inelastic.
- Price spikes will be separated by periods of lower prices resulting from economic weakness and/or mild weather. However, it is quite possible that these "lows" will be high by historical standards.
There is no indication that recent price increases have led to a significant improvement in the average efficiency of buildings, appliances, or vehicles in the US. The nominal life of these systems varies from around 10 yrs (vehicles) to over 30 years (buildings) and supply problems are certain to occur before the end of their useful life.
There is no "Plan B" if the supply optimists are wrong. We need to increase awareness of potential the severity of the problem and promote actions to rapidly increase energy efficiency and flexibility and accelerate action on developing alternatives to oil and gas.
The U.S. infrastructure - housing, commercial buildings, transportation, utility network - has been built based on plentiful, relatively inexpensive energy. The country must make the transition to a world where energy is expensive and supplies of certain sources may be limited and/or periodically interrupted. Doing so will be expensive and time consuming. Delaying serious action further will make the transition even more difficult.
The most promising near-term option is dramatically increasing conservation and energy efficiency improvement programs. These efforts will provide major economic benefits (new jobs, operating cost savings, smaller increases in energy prices) and environmental benefits (reduced air and water emissions, improved indoor air quality).
This is from a fairly mainstream, even conservative, industry rag. When will the Democrats wake up that this is an opportunity, not something to let the administration set the terms of the debate about???
China looks at $24bn coal-to-oil plan as Beijing bets on oil price staying high
China is gearing up for a massive investment in a homegrown fuel source to cut its growing reliance on imports - plants to turn coal into gas and oil.
(...)
China's central planners have on their desks proposals for at least $24bn (20bn, £13.6bn) worth of large-scale coal-to-liquids projects, with a number of pilot plants already under construction in Inner Mongolia and other coal-rich provinces.
"If all of these projects went ahead, it would be the equivalent of replacing one million barrels of oil a day," said Jim Brock, a Beijing- based energy consultant. China now consumes about 7m barrels of oil a day.
(...)
Building large CTL plants is (...) effectively, a big bet that oil will remain above $35-$40 a barrel, something many officials and industry executives think is getting less risky by the day.
"We believe they are on the verge of approving some major projects," said Richard Whiting, an executive vice-president of St Louis-based Peabody, the world's largest coal company, which has just opened a Beijing office.
(...)
The philosophy underlying the central government's approach to CTL mirrors that in other industries that the government deems strategic - to maximise self-reliance. Despite its growing oil import bill, and all the headlines that have accompanied it, China remains an energy-rich country, especially compared with Asia's other major economies, Japan and South Korea.
Japan and South Korea import more than 95 per cent of their energy needs. China by contrast relies on imports for 6 per cent of its energy, according to the official government estimate, or 13 per cent, by Mr Brock's calculation.
The government's desire to maintain that self-reliance is boosting the case to maximise use of local coal, which is expected to provide about 60 per cent of China's energy needs by 2020 in any case, and the need specifically for CTL plants.
China now relies on domestic coal for 77 per cent of its power needs and by 2030 it will still be about 60 to 70 per cent.
The recent backlash in Washington against the bid by CNOOC, a state-owned oil major, for Unocal, a US energy company, stung China's central government and has only reinforced its belief in self-reliance.
The Chinese are aware they have an energy crisis on their hands, and they are being VERY proactive about it. Now, a side effect of this is to promote the use (and mining of coal), the most polluting - and deadly - energy source, so it's not altogether good news. But if we do not want to have to choose between the economy (in the short term) and the environment, we need to get everybody on board on a marter energy policy AND on strict environmental guidelines. These will be the first to be dropped if the energy policy is dictated by short term crises.
Project delays 'drive up prices'
Delays of big oil projects are helping to drive oil prices higher as energy companies become increasingly unreliable at delivering production from new oilfields on time, a recent analysts' report has warned.
(...)
"The industry is truly dreadful at project management, or at least at predicting the timing of project start-ups. The amount of production growth that has been lost to projects being delayed over the past few years is stunning, over 2m b/ d-2.3 per cent of expected global production in 2007," the report said.
As aresult Bernstein believes annual supply growth will slow to 1 per cent in the next decade, compared with the 2 per cent expected by many other analysts - including those at the International Energy Agency, the industrialised countries' watchdog agency.
(...)
The problem is caused by companies having to venture into increasingly difficult terrain and use untested technology as the world runs out of big, easy-to-find oilfields. Meanwhile, new competitors attracted by high oil prices have made hiring exploration rigs increasingly difficult.
(...)
The longer-term prognosis also looks bad. John S. Herold, the industry consulting and research firm, said in a report released yesterday that worldwide oil reserves had "barely changed in 2004, the poorest performance by the sector in many years". Total year-end reserves were up only 2.8 per cent, with companies spending more on share buy-backs than on exploration, said Tom Biracree, vice-president at John S. Herold.
Now, I personally do not believe the conspiracy theories that saythat oil companies are voluntarily withholding production to "gouge" us. Having been involved in some of the recent big projects, I can confirm that they are getting increasingly complex, difficult to manage and expensive. You now have a combination of technical difficulties as you tap less accessible fields, political difficulties as they are located in often-difficult countries, and higher overall costs.
We are running out of cheap oil, andthe oil companies have little to do with that.
Fears for growth push energy efficiency up global political agenda
High oil prices and fears for their effect on economic growth have pushed energy efficiency high up the political agenda, with both the International Monetary Fund and the Group of Seven leading economies calling over the weekend for more energy conservation to maintain stable growth.
Yesterday, even President George W. Bush called on Americans to "pitch in" and drive less.
The focus on efficiency comes as oil prices have hovered around levels of more than $60 a barrel and most energy forecasters predict oil supply to peak at some point in the next 20 to 30 years.
(...)
Sadad Al-Husseini, former head of exploration and production at Saudi Aramco, the world's largest oil producer, said there was no alternative but to pursue energy efficiency.
"The best alternative energy is energy efficiency," Mr Husseini told the FT at an oil conference in London last week. "There is too much wastage with energy. There are too many cars that are far bigger than what they need to be. In the home, there are often heating and air conditioners on un-necessarily," he said.
For a man who was in charge of about one quarter of the world's oil reserves for 12 years, Mr Husseini speaks with some authority when it comes to future oil demand and supply trends.
He said predictions of oil demand reaching 120m barrels a day in 20 years, or more than 40 per cent above current levels, were nonsense, as there was not enough oil to sustain these levels, as higher production required more oil to be found to replace reserves.
(...)
achieving greater energy efficiency depends largely on the US, which accounts for about a quarter of global oil demand. With more than 80 per cent of additional demand for oil coming from the transportation sector, fuel efficiency is critical in the automobile industry.
However, new fuel efficiency standards for vehicles introduced in the US last month - just before Hurricane Katrina drove up petrol prices to more than $3 a gallon - disappointed hopes of tougher regulation.
So, everybody agrees that the situation is bad, that current policies are unsustainable - but so far they only talk about it, and politicians are doing nothing yet to prepare us seriously. We need to build on these official acknowledgements to bring the issue front and center.
And meanwhile, in Iraq:
Ten die as Iraq bomber targets oil workers
A suicide car bomber yesterday rammed a busload of oil workers in Baghdad, killing at least 10 and wounding 30, in an attack on a vital industry at the centre of sectarian disputes in next month's constitutional referendum.
(...)
Sunni Arab insurgents frequently attack oil facilities in a campaign to foil US-backed efforts at economic reconstruction, but have not so far focused on oil workers.
Threats to the Shia-dominated oil ministry could heighten tensions in the run-up to a referendum on October 15 on the constitution, some of the most controversial points of which deal with the administration and distribution of oil resources.
(...)
Sunni Arabs, who make up about 20 per cent of Iraq's population, fear such language would lead to a diversion of a greater share of oil revenues to the mainly Shia south, particularly as southern provinces will be allowed to form a federal region. Though largely poor and underdeveloped, the south holds an estimated 85 per cent of Iraqi oil reserves, with most of the rest in the Kurdish north.
Let's flag it right away: the "war option" is, in my view, a very much possible course of action from the Bush administration if the energy crisis becomes really acute, with shortages. I have little trouble imagining them whipping up nationalist fervor against those foreigners that deny America of its oil, and then targetting Iran or Venezuela, which are being bogeymanised pretty consistently.
There is one argument to keep in mind: war will not solve anything: you can deny oil to others, but you cannot have access to it if you invade a country, as Iraq shows. Wer will not bring cheap Venezuelan or Iranian oil, this is pure folly. But it will distract criticism from the administration into "traitors". Again, this issue needs to be preempted.
I am sorry if this is all gloomy, but this is not me speaking, it's the G7, the IMF, the IEA, the Chinese government and investment bankers. Bush spoke about conservation, but real action is needed - and the Dems need to act first.
Please?