IEA Sees Oil Crunch Looming.

[tarabell]

First, the full report for this news item can be found here:
http://online.wsj.com/public/resourc...ea20070707.pdf

This story has appeared in one form or another in every major news publication this week, and didn’t really get a lot of official attention but is rattling a lot of cages at places like the Oil Drum. The Peak Oil enthusiasts aren't quite panicking and saying this is a SHTF announcement, but it does as some have said, fall under the “brown smelly substance hitting a vortex” category.

Also from what I’m reading, it would have been unthinkable for the IEA (characterized as a “Pollyanna” organization) to suggest something like this as little as a year ago.

But still, 2010 is only 2 ½ years away – practically the blink of an eye.

On the surface it doesn’t seem like much – demand will grow at 2.2% per year instead of 2% as previously estimated, mostly due to China and India consuming more.

If it smells like Peak Oil, it probably is

You can blame all those developing countries whose populations are approaching the critical $3,000 per capita GDP level -- that magic moment when, according to the IEA, "a middle class usually emerges, eager to purchase cars, fly in aeroplanes, install air-conditioners and, more generally, use energy-consuming appliances.

How does anyone convince a developing middle class in dozens of countries who are hungry for hundreds of Starbucks etc and chain stores with an avalanche of cheap cars and appliances is not in their best interests in the long run, any more than hold the corporations back who are salivating to open these chains to sell more products? It’s like keeping 2 rabbits apart. Unfortunately maybe there is only one way – deep recession.

And then you read reports that Kuwait’s oil reserves may actually only be half what they publicly estimate:
Why does Kuwait keep its oil reserves secret?
I’m learning there is a big difference between proven, probable, and possible reserves, and that Kuwait's proven reserves may really only represent a fraction of the whole. (Proven means about a 90 percent chance - all conditions being favorable - of the oil actually being pumped up from underground and sold on the market. Probable suggests a 50 percent chance and possible about a 10 percent chance.) Apparently they do not have to publicly disclose full details of their reserves, and there are no third party inspectors so “transparency” as it’s called, is lacking here. I know we are all aware that cultural differences play a large part in how business is done in different countries. The protocols of directness versus politeness, disclosure vs face saving are vastly different from Mexico to the US to Asia to the Middle East. So this part should be no surprise. I have also seen reports complaining that Saudi Arabias “transparency” isn’t what it should be either. They reportedly haven't provided production data for over 2 decades and they’re supposed to have one of the largest oil fields in the world (Ghawar).

But when you see Simmons also coming out with a few predictions like these at the same time:

Prediction #1 (of 3) from Oil Expert Matt Simmons: ‘Real Risk’ Gas Pumps Run Dry This Summer

“You won’t see it until it’s happened,” he said. It could start in any region of the U.S., he added, and once the media gets wind of it, Americans everywhere will rush to “top off” their gas tanks, exacerbating the situation until it becomes a full blown emergency.

Prediction #2 (of 3) from Oil Expert Matt Simmons: World to Soon Realize Oil Production Peaked

Matthew R. Simmons, head of Simmons & Company International, a Houston-based energy investment bank, doesn’t just believe that peak oil has already happened. He told EnergyTechStocks.com that in another year or so the world will wake up and say – in Simmons’ words – “Oh, ****. We peaked in May 2005.”

And then you read some news items like the following, well, the intestinal discomfort certainly increases.

Gas prices on the rise; fuel shortage due to flooded refinery

By the end of the week, prices could reach $3.25 to $3.50 a gallon in the Midwest, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service. He said Tuesday that the prices consumers pay in the next 10 days could be the highest of the year.
...“Coffeyville lit the fuse,” Kloza said, adding problems at a Valero refinery in Ardmore, Okla., and the BP refinery in Whiting near Chicago also are contributing to high wholesale prices. “Ardmore was a basic hiccup for a U.S. refinery. But having a hiccup on the backside of kind of a major organ disappearing is pretty serious.”

ND Governor extends hours of service waiver for gas supplies

Gov. John Hoeven has issued an executive order extending service hours for commercial truck drivers providing gas stations with fuel until July 19, 2007. The measure extends an earlier executive order due to expire on July 7.
...Reduced supplies owing to a slow down at a major petroleum refinery in Minnesota, along with a weather-related stoppage at a second refinery in Kansas, have combined with increased fuel demand to create a potential gasoline shortage in North Dakota and regionally.

Nebraska governor declares state of emergency related to fuel

Truckers spent more than an hour waiting to fill up with fuel for delivery as some gas pumps ran dry across the state on Wednesday.
Nebraska's governor has issued an executive order that will allow gasoline truck drivers to alter their hours of service.
Gas supplies in the state have been tight after flooding in Kansas last week. Industry experts said high waters submerged a Coffeyville, Kan., refinery and waters could keep the 108,000-barrel-a-day facility shut down for most of the summer.

It does seem as though we're in for a bumpy ride, perhaps in the short term as well as the long.

[WriConsult]

Scary stuff. Could be a whole lot of ugliness coming. Wayne, I think you're right that conservation won't seriously kick in until major disruptions have begun.

When we bought our current house, we deliberately chose one on a lot with ample sun exposure so we could grow some of our own food. I certainly hope the predictions in The End of Suburbia don't come to pass, but we want to be prepared just in case.

[xcel]

Hi Tarabell:

___From your accumulation of reports, it looks like the initial hits are already being felt in the upper Midwest … Although these are refinery caused shortages, the description of our refined gas purchases from Europe hitting maximum levels should be enough to tell everyone that we are headed in the wrong direction and in one hell of a hurry.

___I cannot wait to see Billy Bob trying to fill up his Nissan Aramda and the Bass Boat in those areas where gas is already very tight if even available …

___The silver lining in all of this is fuel demand will drop, CO2 emissions will somewhat stabilize and the US will begin to make the hard choices it should have 10 years ago to keep this country strong over the longer term.

___Wriconsult, I have over 2.5 acres to play with but I am most certainly not looking forward to the back breaking work if it comes to that

___Good Luck

___Wayne

[WriConsult]

Originally Posted by xcel

___Wriconsult, I have over 2.5 acres to play with but I am most certainly not looking forward to the back breaking work if it comes to that

Yep, one good reason I hope it never comes to that! We haven't planted anything yet, but nice to know we can.

[brick]

Originally Posted by WriConsult

Yep, one good reason I hope it never comes to that! We haven't planted anything yet, but nice to know we can.

Wouldn't hurt to plant a small garden just for kicks. My newest hobby is attempting (not very successfully) to grow hot peppers and a few other things in containers on my porch. I've learned that there really is an art to gardening that can only be learned through trial and error. Ok, mostly error. Better to make them now, I figure.

[ILAveo]

Originally Posted by xcel

Hi Tarabell:


___Wriconsult, I have over 2.5 acres to play with but I am most certainly not looking forward to the back breaking work if it comes to that

___Good Luck

___Wayne

It beats driving to the gym for a work out, but I bet you already knew that.

[GreenBlues]

Food from your garden sure beats eating Chinese what not. Saw an article today on CNN.com where a Chinese outfit got caught adding ground up cardboard to a bread product. Tasty I bet.

[Bike123]

A good commentary on the IEA report: http://www.energyandcapital.com/arti...a-peak+oil/470

A few excerpts:

<<It's a decent piece of work, 82 pages with lots of good charts and data. It was also a welcome break from the delusional projections that the IEA has made for its entire 30-year existence, consistently predicting that supply will magically meet whatever the demand was projected to be.

Because for the first time, the IEA admitted that they have some doubts about oil supply keeping up with demand.>>

<< Essentially, the report's conclusions boil down to this:

1. Demand will rise at about the rate of 2.2% a year through 2012, primarily driven by the developing world's consumption, which is rising three times as fast as in the OECD.
Transportation fuels will be the largest source of demand, by far.

2. Non-OPEC production is expected to increase from 50 mbpd today to 52.5 mbpd by 2012, but the additional production will be mainly from unconventional sources such as natural gas liquids, tar sands production, extra heavy oil, coal-to-liquids, even biofuels.

3. OPEC spare capacity will increase slightly from 2.5 mbpd in 2007 to a high of 3.4 mbpd in 2009, then decline to just 1.5 mbpd (1.6% of demand) by 2012. Almost all of it will have to come from Saudi Arabia.

4. Depletion rates are worrisome: "Net oilfield decline rates average 4.6% annually for non-OPEC and 3.2% per year for OPEC crude. Aggregate levels mask much sharper declines in a 15-20% per annum range for mature producing areas and for many recent deepwater developments. All told, the forecast suggests the industry needs to generate 3.0 mb/d of new supply each year just to offset decline. Notwithstanding, above-ground supply risks are seen exceeding below-ground risks in the medium term."

5. Rising project costs, shortages of labor and materials, and geopolitical problems will continue to plague world oil production, and conspire to create uncertainty and delay projects, so supply could fall short of demand by 2010. And shortages of natural gas are even more imminent. >>

<<The IEA even acknowledged the peak of non-OPEC conventional oil, although they couldn't quite bring themselves to say it:

"The concept of peak oil production and its timing are emotive subjects which raise intense debate. Much rests on the definition of which segment of global oil production is deemed to be at or approaching peak. Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak."

You say potato . . .

Redefining conventional crude oil, by including sources like tar sands and coal-to-liquids, is really bending over backwards in order to call the top a "plateau" instead of a "peak." >

[xcel]

Hi All:

___Bring on the Plug-ins!

___Good Luck

___Wayne

[worthywads]

Originally Posted by Earthling

Beer will at least double in price, because so much grain will be used for ethanol production, so that GM can still peddle SUV's.

Harry

I quoted you Harry but this is for the homebrewers too.

I haven't seen any price increase yet at my brewery. But there is rumblings that the price of barley is going to go up, it has already in Europe. Ethanol isn't only a US or GM phenomena.

Good beer is made with 100% barley, with wheat in some styles. Only mass marketed piss is made with corn.

Unfortunately it is land being switched from barley to corn that hurts barley prices. Fortunately for US brewers barley will grow in northern (Canada) areas that don't grow corn as well.

Anyone wanting to grow barley for homebrewing is in for some challenges, the barley needs to be malted which is an art in itself, all-grain is like making coffee, but malting is more like roasting, only it takes a week of tending.