Like lots of people, I wince whenever I gas up and wonder when the price will top out. I decided to do a little research into the subject and soon found myself almost overwhelmed with information. I came across the topic of "peak oil" and followed that thread to learn some uncomfortable facts about how we have largely used up the so-called "easy oil" deposits. Bottom line, we are on the verge of passing a peak in world oil production and then entering an era when oil supply will go into permanent decline. This will have unimaginable impacts on life as we now know it. It is not a question of "running out" but rather of being faced with the fact that oil will be increasingly scarce - and expensive. Think $10 per gallon for gasoline. Virtually everything we use depends on cheap oil - including food.

Just a few facts:
- World oil production has been flat for the past three years even as demand has climbed and prices have reached record levels.
- For every three barrels of oil being used only one barrel of new oil is being discovered.
- Oil discovery peaked in the 1960s and has been going downhill ever since despite tremendous efforts to find more.
- The U.S. was once the world leader in oil production and export. We peaked out in 1970, and now produce less than half of what we did then. We now must import more than 60% of the oil we use.
- Most of the world's oil producing nations have passed their peak and in decline.
- Saudi Arabia, the big boy on the block when it comes to oil, may have reached its peak. It denies this, but there is good reason to question their claims.

It's very likely that we're getting close to peak oil. I think the main country that is not making use of its natural resources is Iran, and given the political impasse with that country, that's not likely to free up any time soon.

What should be even more disturbing is the rapid rate of Chinese and India modernization, which will require more oil. We really need to be looking into alternative energy sources.


WEB

Based on what I have been reading, alternative biofuels will probably never contribute more than a small percentage of our total fuel consumption. It takes oil and natural gas to grow and process crops that are converted into fuel. The energy return on energy invested is extremely small. The same is true for the oil sands and oil shale. Oil is the source base for far more than just fuel. It is the feed stock for plastics, medicines, synthetic cloth, cosmetics, pesticides, etc. We even pave our streets in oil in the form of asphalt. The modern world economy is founded on the rapid movement of goods and services over large distances, and that is based on cheap oil. As oil supplies shrink that world will have to change. It will be too expensive to get our food and consumer goods from thousands of miles away. Travel will become much less common. Chances are that we will learn the implication of the old Chineese curse, "May you live in interesting times."

I just finished reading an article in Business Week Magazine (June 25, 2007) titled, "From Peak Oil to Dark Ages," that examines the issue of world oil production entering a state of decine. Business Week is a conservative leaning publication more prone to tout financial good news than to suggest that our basic economic foundation is in question. You can access the article via the following link:

(From Peak Oil To Dark Age?

This article is in line with some important government sponsored studies of oil security issues. These include the comprehensive "Hirsch Report" published by the Dept. of Energy and the Dept. of Defense, "Transforming the Way DOD Looks at Energy." Bottom line, while the exact timing of peak oil is in debate, the fact that we are rapidly closing in on it is accepted by all but a very few. Like global warming, it is time to move beyond debating its reality to figuring out how we are going to deal with it. The real question is what will it mean to life as we now live it?

I just read that Businessweek article a few minutes ago and then saw this.

Yes, it's a fascinating and important topic. One thing, however, that is left out is: the sharp rise in productivity in the use of oil. That is not the whole answer, but it helps quite a bit.

__________________
Our fears in Banquo stick deep; and in his royalty of nature reigns that which would be fear'd: 'tis much he dares; And, to that dauntless temper of his mind, he hath a wisdom that doth guide his valour to act in safety.

Macbeth 3:1

>One thing, however, that is left out is: the sharp rise in productivity in the use of oil. That is not the whole answer, but it helps quite a bit.<

Improved efficiency is helpful. However, gains in efficiency have not reversed the growth in the total consumption of oil. As some gains have been realized in squeezing more useful energy from a given quantity of oil this has been outstripped by the fact that there are increasingly more people buying and acquiring more "stuff" that relies on oil-based feedstock and fuels. A commentator on peak oil made the point that we can double the efficiency of a car by simply putting twice as many people in it when it is driven. As a matter of fact, the saving would be more than double, because it would reduce the demand for new cars being manufactured and serviced. Regardless, the world has a finite amount of oil that is being consumed at an unsustainable rate. That fact will become increasingly evident as oil price increases turn the vise on our economy and standard of living.

I recently had an interesting conversation with a local friend. He assured me that the talk about an energy shortage is just hype. There is a new source of boundless energy that will literally revolutionize the world providing cheap energy to everyone. It will not produce CO2 thus saving us from global warming. This miracle substance is called "Brown's Gas." My friend even tried to interest me in investing in a device that will produce this amazing fuel assuring me that it actually generates more energy in the form of gas than it consumes in the form of electricity.

I did some research into Brown's Gas. There have been several attempts to make this gas in quantities that could be used for commercial purposes, and all have failed. The fact is that the second law of thermodynamics makes it impossible for any source of energy generation to produce more energy than it consumes. In other words, there is no free lunch.

Oil became the primary source of energy for most modern societies in the early 1900s. It is an amazing substance and allowed us to build a civilization with a material standard of living beyond the imagination of pre-20th Century people. However, it is a finite resource, and we have been gobbling up the easiest and best reserves at an unstainable rate. Now, we are approaching a point when the world total production of oil will top out and then go into a long, irreversible decline. If we have the will to face this challenge and to take the necessary steps to prepare for it, we can deal with it - albeit with some difficult adjustments. If we don't take proactive steps the consequences will likely be disasterous.

I have decided to go out on a limb and make a prediction about oil. I am hoping that there will be people reading this who will call me on my prediction and tell me why I am wrong. As a matter of fact, no one will be happier than me if indeed I am wrong.

I predict that the price of regular, self-serve gasoline will climb above $4 a gallon by November of this year. Frankly, I will be surprised if it doesn't hit at least $5 a gallon by February, 2008, and that may be just the beginning. There will be places in the country where the cost will be 10+% higher.

I do not make these predictions without reason. I am basing my forecast on a number of oil industry, government and independent reports - including some generated by oil producing countries.

If I am right, the implications are significant. Obviously, the cost of personal travel will go up. However, that is just the tip of the ice berg. It will percolate through the economy hitting just about everything we take for granted. Anybody want to speculate on how it can change things?

The National Petroleum Council (NPC) just released a report prepared by some of the oil industry's biggest guns for President Bush. For years these guys have been in denial of the possibility that the world is reaching a point where there will not be enough oil produced to meet growing demand. Indeed, they rediculed claims of pending peak oil. Well, folks, they just did a 180 degree about face essentially admitting that we are on the brink of a major turning point when it comes to energy - and just about everything else.

Oil and gas may run short by 2015, say industry experts - Independent Online Edition > Climate Change "The predictions should send a shiver down humanity's collective spine as a shortage of oil and gas has been predicted to cause industrial collapse, market crashes, resource wars and a rise in poverty. Some forecast that fascist regimes will rise out of the chaos.

Chris Skrebowski, editor of the Energy Institute's Petroleum Review, said the report's publication showed the industry "'fessing up that it really has a problem on its hands". Until now, he said, "companies, full of share options, have been terrified of frightening the markets" by revealing the truth."

Chances are this story will set off a chain reaction of media coverage of oil supply issues.

Mon Jul 23, 2007

WASHINGTON (Reuters) - Iraq's crude oil shipments to the United States in May fell to the second lowest monthly level in almost four years, the U.S. Energy Department said on Monday.

Iraq exported 341,000 barrels of crude oil a day to the U.S. market in May, down 39 percent from the month before.

The Energy Department said it was Iraq's second smallest volume of crude sent to the United States since September 2003, a few months after American forces removed Saddam Hussein from power.

The United States imported an average 553,000 barrels of oil a day last year from Iraq, making it America's sixth largest foreign oil supplier.

But shipments are down so far this year as Iraq's oil sector has been hit by insurgent attacks, disrupting oil production and exports.

Iraq's oil production averages about 2.1 million barrels a day, down from daily output of 2.5 million barrels before the war and much less than the 3 million barrels a day the Bush administration had hoped Iraq would be pumping by now.