Liberal Democrat Conference: 'Oil price could double in return to 1970s style shocks'

The Telegraph reports:

Energy secretary Chris Huhne has ordered his officials to look at the impact of a 1970s-style oil price spike on the British economy. Mr Huhne said the UK was having to prepare itself for “lots of shocks”, forcing the price of a barrel of oil to double, mirroring the volatility last seen in the 1970s.
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A 1970s-style doubling in the price of oil would drain £45billion from the UK economy in two years, hitting investment and jobs. He told a meeting on the fringe of the party’s conference in Liverpool: “We will have a world where there may be lots of shocks, we may well have oil price rises which are similar to the ones that we had in the 1970s, a doubling. I have asked for some work to be done in the department about what the impact of that might be in terms of British business, businesses that have nothing to do with energy, with green growth, entirely outside."

Could it be that the UK government has finally woken up and realised there's a problem with oil supply?

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An Inconvenient Truth about OPEC

An interesting article over on Project Syndicate, here's a few paragraphs:

In forecasts that carry forward to the 2030’s, the three organizations [IEA, EIA and OPEC] share the view that world energy demand will increase, that developing countries will account for most of the increase, and that fossil fuel will remain dominant. They also agree that dependence on oil from OPEC members will increase as non-OPEC oil resources dwindle and become more expensive to extract. But a major flaw in modeling world oil markets makes these forecasts as unrealistic as a projection that humans will land on Mars tomorrow.
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It is nearly impossible for OPEC members to produce the difference between estimated world demand and non-OPEC supply. For example, in its recent forecast, the EIA’s base-case scenario is that, by 2035, OPEC will add about 11 million barrels of oil a day (mb/d) to its 2010 output. Is this possible when production is declining at a rate of at least 3%?
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Indeed, given the expected growth in energy demand in the next two decades, and the possible – even likely – shortfall in OPEC supply relative to the projected “call on OPEC,” the term “alternative energy” will lose its meaning. The only “alternative” to harnessing all feasible energy sources will be a slow-growth world of permanent shortages and increasing misery.

Mike

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Peak oil is the "rosy scenario"...

Well, that's the argument from Dmitry Orlov. You need to read the whole article, but this short quote sums it up:

When faced with insufficient domestic oil production, an industrialized country has but two choices:

1. Import oil

2. Collapse

But when faced with insufficient global oil production, an industrialized planet has just one choice: Choice Number 2.

Needless to say, it's at the "doomer" end of the spectrum, but it's difficult to argue with the points made, sadly...

Mike

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German military report on Peak Oil

A German military think tank has produced a report on Peak Oil, and it's been leaked. Der Spiegel has a report on it (in German and English), and the report can be download in German from here.

If, like me, you can't read German, there's an excellent summary on Robert Rapier's blog here. A few quotes from the summary on his blog:

In the past, resources have always triggered conflicts, mostly of regional nature. For the future, the authors expect this to become a global problem, as scarcity (mainly of crude oil) will affect everybody.
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Higher cost in commercial transportation markets might severely affect current supply chains, and no alternatives are in sight (electric trucks don’t exist yet). Particularly food might become a critical issue for countries that are a) highly dependent on imports and b) are susceptible to price-increases of food products, particularly affecting Africa, parts of Asia and Latin America, and the Middle East.
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Overall, more expensive transportation and increasing problems “at home” might reduce the ability of larger countries to intervene internationally (politically and/or with military action), and also lower the readiness to provide help to poorer countries. The focus will be more on a country’s egotistic (energy) interest and not so much on an ideal of transferring Western values. The gap will likely not be filled by NGOs, as they will be affected by similar limits.

The financial risk is not ignored either:

In addition to the gradual risks, there might be risks of non-linear events, where a reduction of economic output based on Peak Oil might affect market-driven economies in a way that they stop functioning altogether, leaving the range of a relatively steady downward trajectory.

Such a scenario could pan out by an initially slow decline of trade and economic activity, combined with higher stress on government budgets from lower tax income, higher social cost and growing investment into alternative technologies.

Investment will decline and debt service will be challenged, leading to a crash in financial markets, accompanied by a loss of trust into currencies and a break-up of value and supply chains – because trade is no longer possible. This would in turn lead to the collapse of economies, mass unemployment, government defaults and infrastructure breakdowns, ultimately followed by famines and total system collapse.

Well worth reading!

Mike

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Oil and hurricanes in 2010

It's been a remarkably quiet 2010 hurricane season for oil production in the Gulf of Mexico so far, which is especially good considering that the BP oil well leak was being worked on through the first month or two of it.

However, the season doesn't finish until the end of November... You can keep an eye on the latest developments on this page from the NHC, which displays an image like this:

If you visit the page itself, you can click on the hurricanes and storms to get more details on their predicted tracks.

Mike

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