BIKE: Living in a fool's paradise

[Roger Baker]

Oil is today trading at about $54+ a barrel, and the Saudis admit that  
it could go to eighty a barrel:

<http://cbs.marketwatch.com/news/story.asp? 
column=Futures+Movers&siteid=mktw&dist=>

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Meanwhile, here is the latest ASPO newsletter:

<http://216.187.75.220/newsletter51.pdf>

The strangest part of this newsletter is that apparently the US Dept of  
Energy  submitted the following section (section 504) to ASPO for  
publication, in the newsletter above. It tells the truth about peak oil  
(read below). Yet the DOE is now dominated by Bushies and never tells  
the truth about peak oil, so something truly bizarre is going on.  --  
Roger

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The Mitigation of the Peaking of World Oil Production

Summary of an Analysis, February 8, 2005

A recently completed study for the U.S. Department of Energy
analyzed viable technologies to mitigate oil shortages associated
with the upcoming peaking of world oil production.   Commercial or
near-commercial options include improved vehicle fuel efficiency,
enhanced conventional oil recovery, and the production of substitute
fuels.  While research and development on other options could be
important, their commercial success is by no means assured, and none
offer near-term solutions.

Improved fuel efficiency in the world's transportation sector will
be a critical element in the long-term reduction of liquid fuel
consumption, however, the scale of effort required will inherently
take time and be very expensive. For example, the U.S. has a fleet
of over 200 million automobiles, vans, pick-ups, and SUVs.
Replacement of just half with higher efficiency models will require
at least 15 years at a cost of over two trillion dollars for the
U.S. alone.  Similar conclusions generally apply worldwide.
Commercial and near-commercial options for mitigating the decline of
conventional oil production include:  1) Enhanced Oil Recovery
(EOR), which can help moderate oil production declines from older
conventional oil fields; 2) Heavy oil/oil sands, a large resource of
lower grade oils, now produced primarily in Canada and Venezuela; 3)
Coal liquefaction, an established technique for producing clean
substitute fuels from the world's abundant coal reserves; and 4)
Clean substitute fuels produced from remote natural gas.

For the foreseeable future, electricity-producing technologies,
e.g., nuclear and solar energy, cannot substitute for liquid fuels
in most transportation applications.  Someday, electric cars may be
practical, but decades will be required before they achieve
significant market penetration and impact world oil consumption.
And no one has yet defined viable options for powering heavy trucks
or airplanes with electricity.

To explore how these technologies might contribute, three
alternative mitigation scenarios were analyzed:  One where action is
initiated when peaking occurs, a second where action is assumed to
start 10 years before peaking, and a third where action is assumed
to start 20 years before peaking.

Estimates of the possible contributions of each mitigation option
were developed, based on crash program implementation. Crash
programs represent the fastest possible implementation – the best
case.  In practical terms, real-world action is certain to be
slower.

Analysis of the simultaneous implementation of all of the options
showed that an impact of roughly 25 million barrels per day might be
possible 15 years after initiation. Because conventional oil
production decline will start at the time of peaking, crash program
mitigation inherently cannot avert massive shortages unless it is
initiated well in advance of peaking.  Specifically,

•	Waiting until world conventional oil production peaks before
initiating crash program mitigation leaves the world with a
significant liquid fuel deficit for two decades or longer.

•	Initiating a crash program 10 years before world oil peaking
would help considerably but would still result in a worldwide liquid
fuels shortfall, starting roughly a decade after the time that oil
would have otherwise peaked.

•	Initiating crash program mitigation 20 years before peaking
offers the possibility of avoiding a world liquid fuels shortfall
for the forecast period.

Without timely mitigation, world supply/demand balance will be
achieved through massive demand destruction (shortages), accompanied
by huge oil price increases, both of which would create a long
period of significant economic hardship worldwide.

Other important observations revealed by the analysis included the
following:

1.   The date of world oil peaking is not known with certainty,
complicating the decision-making process.  A fundamental problem in
predicting oil peaking is uncertain and politically biased oil
reserves claims from many oil producing countries.

2.  As recently as 2001, authoritative forecasts of abundant future
supplies of North American natural gas proved to be excessively
optimistic as evidenced by the recent tripling of natural gas
prices.  Oil and natural gas geology is similar in many ways,
suggesting that optimistic oil production forecasts deserve to be
viewed with considerable skepticism.

3.  In the developed nations, the economic problems associated with
world oil   peaking and the resultant oil shortages will be
extremely serious.  In the developing nations, economic problems
will be much worse.

4.  While greater end-use efficiency is essential in the long term,
increased efficiency alone will be neither sufficient nor timely
enough to solve the oil shortage problem in the short term.  To
preserve reasonable levels of economic prosperity and growth,
production of large amounts of substitute liquid fuels will be
required.  While a number of substitute fuel production technologies
are currently available for deployment, the massive construction
effort required will be extremely expensive and very time-consuming,
even on a crash program basis.

5.  Government intervention will be essential, because the economic
and social impacts of oil peaking will otherwise be chaotic, and
crash program mitigation will need to be properly supported. How and
when governments begin to seriously address these challenges is yet
to be determined.

Oil peaking discussions should focus primarily on prudent risk
management, and secondarily on forecasting the timing of oil
peaking, which will always be inexact.   Mitigation initiated
earlier than required might turn out to be premature, if peaking is
slow in coming. If peaking is imminent, failure to act aggressively
will be extremely damaging worldwide.

World oil peaking represents a problem like none other.  The
political, economic, and social stakes are enormous.  Prudent risk
management demands urgent attention and early action.