September 2010:

And June, 2005:

‘Nuff said.

It’s still a fairly skeletal first draft, comprising only 16 web pages, but hopefully it will grow, and serve as a useful guide to the public, the media, and others. It is located here:

Peak Oil Reference

I invite feedback and suggestions for future revisions.

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My segment begins at 47:04.

Beyond Carbon Legislation: Energy Transition

A New Chance To Get Energy Policy Right

By Chris Nelder
(Cross-posted to HuffPo)
July 23, 2010

“I felt a great disturbance in the Force… as if millions of voices suddenly cried out in terror and were suddenly silenced.” –-Obi-Wan Kenobi

The death of the climate bill yesterday struck the Climateers like a wet, oil-soaked dead dolphin to the face.

Their wails of despair and cries for retribution swamped my Twitter stream, as carbon cap champions learned the Democratic leadership had given up on mustering the 60 Senate votes needed to pass the bill. The political realities of Washington had stymied them once again. Nothing had changed.

The news release a few hours later that China had unveiled a $740 billion, 10-year energy plan–including all forms of energy–only rubbed salt into their wounds. There was China once again, charging ahead, doing what we should be doing, and here we were “back to Bush.”

Then, true to their fundamentally political nature, the Climateers set about attacking Obama, Republicans, and the Blue Dog Democrats, trying to pin the blame for the bill’s failure. The notion that there might be something inherently unworkable about carbon legislation remained taboo.

As for me, I was pleased. Perhaps, I thought, we’d now have a chance to get the policy right.

There was a time when I would have joined the mourning of my environmentally minded brothers and sisters. I supported a carbon pricing approach two decades ago. We could have had a society that was a quarter of the way down the path toward energy transition if we had done it then, instead of starting from near zero today. In fact, I supported the carbon tax approach (but not cap and trade, or cap and tax, or carbon capture and sequestration) right through the final months of 2009.

But then Copenhagen and cap-and-trade failed as I expected, and I read Empire of Illusion…and a few key insights into the problem of carbon control finally sunk in.

One, the energy business moves at glacial speed. It’s the biggest business in the world and has the most powerful lobby in Washington, and it generally gets what it wants. Add in the agriculture and automobile lobbies, and it’s essentially an unstoppable force. Comparatively, the lobby for alternative energy, permaculture, rail, and other solutions is a tiny speck. Call me cynical, but a few decades of watching reform fail in energy, transportation, and the environment will knock a lot of magical thinking out of your head.

Two, nearly everything that gets done in this country gets done by business, not via politics. As long as we’re agreeing to play by the rules of capitalism and relying on business lobbyists to craft policy, then you have to harness that beast in order to rebuild your energy infrastructure. You have to incentivize, not penalize.

It almost seems too elementary to bother saying, but elected officials find it far easier to vote for initiatives that bring money into their districts than for anything that takes money away. Carbon capping is a penalty approach, and predictably it aroused enough resistance to sink it.

As I said last November: “It’s a whole lot easier to find the financing and business support to roll out millions of little solar systems and insulation upgrades and more efficient vehicles, and so on, than it is to get a world full of politicians to agree on anything. Even after you get that agreement, you still have to build the solar systems and cars and install the insulation.”

Focusing on carbon emissions is simply looking at the wrong end of the problem. Instead of trying to control what comes out of the tailpipe, we should be thinking about what we put into the engine. Even if carbon emissions legislation succeeded, it would do little about the even more pressing problem of peak oil (and peak fossil fuels in general).

If we put all our efforts into incentivizing efficiency and renewable energy, and slowly phase out the much larger incentives we put into fossil fuels, we can solve the emissions problem…only we’ll wind up with more energy supply, not less, and it will be more sustainable.

All is not lost, my Green friends. We’re hardly back to Bush. In fact, there is finally significant momentum going in the right direction. Lest they be lost amid the Climateers’ moaning, consider these news releases from the very same day the climate bill died:

• A stripped-down remnant of the climate bill will likely pass, and will include some important, if incremental, incentives: $5 billion for transitioning the truck fleet to natural gas (a big win for the Pickens Plan and companies like Clean Energy Fuels, a stock I own), and $5 billion for the HomeStar program.
• Sen. Frank Lautenberg (D-NJ) announced the FREIGHT Act. Aiming to “Create A 21^st Century Freight Transportation System,” the bill would support rail-based freight transport. It’s not yet clear what kind of teeth it will have, but moving freight off tractor-trailers and onto rail is a key pathway to actually reducing our petroleum consumption.
• The Department of Energy announced a $122 million award for a joint research project led by Cal Tech and the Lawrence Berkeley Lab to try to create chemical fuels using photosynthesis. It’s a bold concept, and precisely the kind of appropriate federal R&D investment that might yield breakthrough discoveries.

Meanwhile, momentum is building toward a slow phase-out of fossil fuel subsidies, and toward longer-range investments in renewable energy and efficiency.

China is still going to run circles around us. Policymaking by the political process is no match for a command economy. To cite just a few examples: The U.S. has committed a total of $13 billion to rail development, while China is already building a $556 billion high speed rail system that will link all of their major cities in five years. The U.S. has no energy plan, while China is embarking on a $740 billion comprehensive energy plan to see them into the future, with vigorous support for renewables. China is on track to do more about its future emissions than the U.S., even while it has just surpassed the U.S. as the world’s largest consumer of energy.

It’s time to rethink our strategy. We would do well to follow China’s model. Instead of taking a political approach, circling the wagons around the eco-warrior camp and battling the fossil fuel industry, we should be developing a serious energy plan based on science, encompassing all forms of energy, to unite all parties in an unreserved commitment to the great task of energy transition. Because oil depletion is relentless, time is running out, competition for fuels is only increasing, and we’re the most vulnerable player at the table.

Never mind carbon emissions. That game cannot be won. What we can do—and what will engender bipartisan support—is work steadily toward replacing fossil fuels with renewables, transitioning from liquid fuels to electricity, and making the most of every last BTU. If we get that right, our carbon emissions problem will take care of itself.

Until next time,

Chris

If you have trouble viewing this video, click here.

For background material on this discussion, see my recent articles:

195 Californias or 74 Texases to Replace Offshore Oil
Another Wake-Up Call for the World’s Biggest Oil Junkie
Officials Wake Up To Peak Oil, Part 1
Officials Wake Up to Peak Oil, Part 2

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195 Californias or 74 Texases to Replace Offshore Oil

The Challenges of Energy Transition

By Chris Nelder

May 31, 2010

As the Deepwater Horizon rig disaster continues to unfold, the peak oil community has a “teachable moment” in which it can illuminate the reality of our energy plight. The public has had a crash course in the challenges of offshore oil, and learned a whole new vocabulary. They are more aware than ever that the days of cheap and easy oil are gone.

What they do not yet grasp are the challenges in transitioning from fossil fuels to renewables.

The Greens (anti-fossil fuel agitators) want to end offshore drilling, but don’t realize that their alternatives are in the wrong scale or the wrong time frame to make a difference. The Browns (the fossil fuel industry) are in full damage-control mode while rapidly losing the public trust. Meanwhile, the politicians are focused on who’s to blame and who will pay, while skirting the fundamental problem of our addiction to oil.

We need to get this conversation back on track. Let’s begin with some simple facts.

Can Renewables Replace Offshore Oil?

Source: Energy Information Administration, Petroleum Navigator. Source data.

Federal offshore Gulf of Mexico has been our last great hope for domestic oil production against a four-decade declining trend. Offshore oil now accounts for 1.7 million barrels per day (mbpd), or over 30%, of our domestic production of 5.5 mbpd.What would it take to substitute wind for offshore oil? At 5.8 MBtu heat value in a barrel of oil and 3412 BTU in a kWh, 1.7 mbpd is equivalent to 2.9 billion kWh per day, or 1,059 billion kWh a year. By comparison, total 2008 wind generation was 14.23 billion kWh in Texas, and 5.42 billion kWh in California.

Therefore, to replace our offshore oil with wind, you’d need 195 Californias, or 74 Texases of wind, and probably 20 years to build it.

The Real Challenges of Energy Transition

Then there are some not-so-simple facts.

You can’t simply substitute electricity for the heat value of displaced oil. You must also build an entirely new infrastructure of wires and electric engines and storage devices.

Building that new infrastructure will take decades of concerted effort and cost trillions of dollars…and require lots of petroleum, natural gas, and coal. We simply don’t know how to build solar panels and wind turbines and wires and generators without them.

The U.S. dependency on oil imports has grown steadily for nearly four decades. At the same time, a globaloil export crisis has been developing as oil producers consume more of their own output and Asia outbids the West for declining exports. The U.S. already spends around $300 billion a year to import two-thirds of oil supply. Without offshore production, imports would rise to over three-quarters of supply.

Our challenge is far more difficult than most people imagine.

We will have to execute energy transition even as our domestic production continues to shrink, new prospects become more risky, competition for global exports increases, our demand remains firm, and the price of oil goes above our economic pain threshold.

Our only defense against the crushing weight of these forces will be to aggressively improve efficiency.

Ten Ways to Do Absolutely Nothing about Your Offshore Oil Habit

Scale and time-to-market issues bedevil most of the typical Green alternatives.

Hybrid cars currently hold about a 3% market share in the U.S., with a lousy 295,528 units sold in 2009. Sales are growing at an anemic 6% per year. The top selling hybrid maker, Toyota, has just lost the trust of its consumers. Moreover, the sales outlook for new vehicles in general is poor in a country still in the grips of recession.

No one has shown how hybrids can scale to offset millions of barrels of crude per day in under 20 years. As far as I am aware, the only Wall Street model that attempted it was Paul Sankey’s Oct 2009 Deutsche Bank report, which I found wanting. More credible is the model from Bank of America’s Tom Petrie, but it showed PHEVs taking from 15 to 40 years to get meaningful traction against oil demand.

Cash for Clunkers replaced 690,000 vehicles, or about 0.3% of the total U.S. fleet, with an average 9 mpg better fuel economy. About 300,000 barrels of gasoline per day will be saved as a result-roughly the same amount that our oil demand would increase every year under a normal 1.5% annual growth rate.

A real strategy for reducing oil demand would be far more radical. It would aim to replace car and truck transport with rail, shifting at least 25% of the load in 25 years and 50% of the load in 50 years. It would cost on the order of $100 billion per year over a 20 year period to build. But the Obama administration has only committed about $8 billion to rail under the stimulus program, while spending far more money on the dead end of road-building.

Transit-oriented development and walkable communities are excellent strategies, but they take two or three decades to execute, or at least they did in the bygone era of cheap and easy oil and credit. At the moment, most mass transit agencies are having their budgets severely slashed, and nobody is rebuilding subdivisions.

Soft solutions, like getting drivers to slow down and telecommute more often, will accomplish little beyond the margins of demand. Biofuels have severe and poorly-understood scaling issues of their own.

Oil consumption will only be marginally reduced under the American Power Act (around 0.8 mbpd by 2030, according to a recent analysis by the Petersen Institute), with its limp support for alternatives to liquid fuels and its misguided focus on carbon emissions.

Carbon pricing would have been a useful approach 30 years ago. Today it’s a blunt tool, incapable of the surgical skill required to navigate energy transition through 20 years of rough water.

A Junkie’s Reality

Those who would shut down offshore oil drilling might want to consider this: Over the next 20 years, the only real alternatives to offshore drilling are to become even more dependent on oil imports at the worst possible time, or trade it for the environmental horror of tar sands and coal-to-liquids production.

I don’t want to be cavalier about the environmental damage of the oil spill. The Deepwater Horizon spill is a disaster in the same way that liver failure is a disaster for a junkie. And that is our reality: scrounging around back alleys and taking unsavory risks to get our daily fix.

Instead of knee-jerk political reactions to the oil spill, the Greens need to understand the deep, intractable problems of energy transition. Likewise, the Browns need to drop the strategies of denial and secrecy, submit to transparency, reach out to the Greens, and begin building some common ground around our mutual challenges.

This moment of truth must not be squandered. The task of the peak oil community now should be to educate the public about the real problems and realistic solutions. To focus our efforts on what goes into the engine, not what comes out of the tailpipe. And to guide the public debate in a way that unifies, not polarizes. For as Ben Franklin famously said, “We must, indeed, all hang together, or assuredly we shall all hang separately.”

Until next time,

Chris

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I weighed in on the Horizon deepwater oil drilling rig disaster, trying to put it in perspective and get people to understand the reality of our energy situation, all politics aside. As my regular readers well know, this was only the latest in a series of wake-up calls we’ve received. Are you listening now, America?

Another Wake-Up Call for the World’s Biggest Oil Junkie

America Still Doesn’t Get It

By Chris Nelder, GetRealList
May 4, 2010

OK, America, it’s time to get real about energy.

The explosion and destruction of the Horizon deepwater rig and the subsequent oil spill disaster are only the latest in a series of wake-up calls you’ve received. Are you listening now?

Your first warning came in 1956, with the publication of M. King Hubbert’s model of US oil production, which correctly predicted its peak in 1970. When Hubbert updated his model on camera in 1976, he also nailed the peak of worldwide conventional oil production in 2005.

Since then, production has remained flat at roughly 74 million barrels per day (mbpd), despite prices gyrating wildly from $40 to $147 to $33 and back to $86 today. High prices did not deliver more oil to market.

Very simply, the cheap and easy oil is gone. What’s left is smaller, harder to find, of lesser quality, and in much more challenging places–under a mile of water and another five miles of rock, for example. It’s expensive, risky, and yes, dangerous.

American domestic oil production peaked in October, 1970 at just over 10 mbpd. It has been in a steadily declining trend ever since, and now stands at 5.5 mpbd.

Over 30 percent of domestic production is from offshore drilling, of which about three-quarters comes from the Gulf of Mexico. Deepwater oil production has only become possible in recent years with the development of cutting-edge technology. We do it not because it’s without risk, but because we need the oil–badly. Only offshore is it still possible to find a field in North America that can deliver over 100,000 bpd. Just two of the Gulf fields, Thunder Horse and Atlantis, produce a combined 350,000 bpd.

Source: Energy Information Administration, Petroleum Navigator. Source data.

By comparison, the remaining onshore resources in North America are now decidedly marginal. The days of gusher strikes onshore in the U.S. are long gone. About 1.2 mbpd, or over 20 percent of domestic production, comes from thousands of small “stripper wells” producing under 15 (yes, 15) barrels per day. Low-quality resources like tar sands and shale oil are vast but expensive, and so difficult to scale that they can’t reverse the long-term decline.

The U.S now imports 9.4 mbpd of crude. At $85 a barrel, that’s an $800 million-a-day hole in our pocket, or $292 billion a year. And our import dependency is only getting worse.

An oil export crisis has been developing for years, as oil producers consume more of their own output and Asia outbids the West for declining global exports.

Even so, as the world’s most dependent oil junkie, our demand for oil has held firm. The decline in U.S. oil demand from 21 mpbd in 2007 to 18.6 mbpd today was almost entirely due to lost industrial demand; gasoline demand remained virtually flat throughout the entire oil price spike and recession.

For every finger pointed at an oil company, three point back at us.

Like the whaling ships of the late 1800s that would sail to the ends of the earth in search of whale oil, deepwater drilling is proof that we are willing to pay enormous sums and go to extraordinary lengths and depths to get oil. We have chosen to accept the risks of environmental damage, the horror of oil wars, and the deaths of rig workers in exchange for a continuing supply of cheap, convenient fuel.

We built an entire economy and topography of civilization on the premise of endless, cheap fuel, and profited handsomely from the ever-increasing bounty of the Age of Oil. But having reached the point where it can no longer be increased, and the risks have grown intolerable, we whine and accuse and complain like teenagers, claim we were victimized, and act as though our demand for oil were an unfortunate accident we had no part in.

Isn’t it time ask ourselves how much more risk we’re willing to take, to accept the situation like adults, and plan accordingly?

Since Hubbert’s first warning, our wake-up calls have come ever faster: The Arab oil embargo of the early 1970s and the gasoline rationing that followed. Oil spills. Oil wars. Economically devastating oil price spikes driven by hurricanes and shrinking spare production capacity. And the increasingly frequent spectacle of sinking and spilling offshore rigs.

Yet somehow, this stark and deadly serious reality has escaped our notice. The eager search for a scapegoat in the wake of the Horizon disaster is a clear sign that America simply doesn’t get it.

After highly visible disasters like the Santa Barbara oil spill of 1969, the Exxon Valdez spill, and now the Horizon spill, the public understands the risk of offshore oil production. What it doesn’t understand—at all—are the choices we now have to make.

Those calling for an end to offshore oil production in the U.S. apparently don’t understand that it accounts for over 30 percent of our domestic supply. They don’t understand that making offshore oil off-limits would be a double-whammy to our pocketbooks, both restricting our income and forcing us to import even more oil at ever-higher prices. They have an inkling that ethanol production is pressuring food supply, but have no concept that the non-food alternatives, like fuel from algae and cellulosic ethanol, are still puny, and a long way from being ready to scale up and replace oil.

Instead of having a rational discussion about how we’re going to manage our remaining offshore oil resources, we look to technology…as if deepwater drillships and blowout preventers and acoustic shutoff switches were the problem, rather than miraculous solutions only a dedicated junkie could love. These technologies don’t fall from the sky. Every safety measure ever invented came as the result of a lesson learned the hard way.

Instead of discussing how we’re going to break our addiction to oil, we turn to politics…as if yelling “Drill, Baby, Drill” or “Spill, Baby, Spill” even louder, or changing tack on our energy policy every four years, could amount to a solution.

All of our politically-driven energy approaches–carbon caps and trading schemes, offshore leases and moratoriums, short-term incentives for renewables, and so on—are woefully incapable of addressing our long term problem.

It’s easy to vilify oil and its producers, and it’s politically popular to call for an end to drilling, but replacing oil is far more difficult and expensive than anyone seems to understand.

Here’s the real challenge.

Within two to three years, global oil production will begin a long decline. As a rough rule of thumb, the world will lose roughly 25% of its oil supply in 25 years, 50% in 50 years, and 100% in 100 years.

It’s likely that we will also see the peaks of natural gas and coal in the next 20 years. Hydropower and nuclear will do little more than hold their current market share.

By the end of the century, nearly everything will have to be powered by renewably-generated electricity, not liquids or gases.

But scaling up renewables to take over for fossil fuels, and transitioning all the infrastructure, is going to be mind-bogglingly expensive, difficult, and slow. Renewables like solar and wind currently make up less than two percent of the world’s primary energy supply. It will take decades of effort and trillions of dollars in investment to offset a mere 20 percent of global demand with renewables, and we’ll have to do it in an environment of declining fossil fuel supply and shrinking economies.

For another rule of thumb, consider this: To compensate for the decline of oil alone using renewables, the world would need to build the equivalent of all the world’s existing renewable energy capacity, every year. Since that is impossible, efficiency and a long transition to renewably powered infrastructure must make up the shortfall. This will take 50 years or more to achieve.

If we use it wisely, offshore domestic oil could provide a crucial portion of the fuel we’ll need in order to build that new infrastructure. But if we remain in ignorance of our energy reality, letting politics be our guide and scapegoating oil companies upon their every misfortune, we’ll go down in flames as surely as the Horizon did.

One more tool in the deepwater toolbox, be it an acoustic shutoff device or something not even invented yet, will not solve our problems. Scapegoating drillers while we continue to pump gasoline into our tanks is unproductive and hypocritical. Hyping the size of marginal resources like shale without acknowledging their low flow rates is disingenuous. And championing alternatives that can’t even meet half a percent of our needs, like non-food biofuels, while trying to shut down the 10 percent of our supply that deepwater production provides, betrays a suicidal ignorance of our reality.

It’s time to wake up, put politics aside, get a grip on the scale of the problem and its solutions, and develop a serious energy plan.

Until next time,

Chris

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–C

In this second part of a two-part series for Energy and Capital, energy analyst Chris Nelder reviews several more recent studies indicating that peak oil is upon us. Government officials and industry are clearly worried about it, but not worried enough to tell Americans the truth.

Officials Wake Up to Peak Oil, Part 2

Governments Worried about Peak Oil – But Not Enough to Tell You the Truth

By Chris Nelder
Friday, April 16, 2010

In the first part of this series, I reviewed a series of reports from March supporting the peak oil view, and warning that world oil production very well may go into terminal decline by 2015 or sooner. The sources included the UK Industry Task Force on Peak Oil and Energy Security and officials within the British government; researchers within the College of Engineering and Petroleum at Kuwait University; researchers from Oxford University; and ConocoPhillips, the third-largest oil company in the U.S.

On March 25 the U.S. Department of Energy (DoE) joined the officially worried, with a report in French newspaper Le Monde titled “Washington considers a decline of world oil production as of 2011.”

The author had pestered Glen Sweetnam, director of the International, Economic and Greenhouse Gas division of the Energy Information Agency (EIA), for details about a presentation he had given at a semi-public DoE round-table with oil economists in April 2009. How he got wind of it, I don’t know, but I admire his persistence.

The zinger was this chart:

Source: Glen Sweetnam, “Meeting the World’s Demand for Liquid Fuels – A Roundtable Discussion,” EIA 2009 Energy Conference, April 7, 2009, Washington, DC

The implication was obvious: The EIA has no idea how production could increase after 2012. In the absence of these “unidentified projects,” they expect global oil supply to decline by about 2% per year, from 87 million barrels per day (mbpd) in 2011 to 80 mbpd by 2015, while demand rises to 90 mbpd.

Within five years, then, there will be a 10 mbpd gap between supply and demand–roughly a Saudi Arabia’s worth of production (currently 10.8 mbpd).

(I should note that although Sweetnam’s chart gives the EIA’s Annual Energy Outlook 2009 as the source, I found no such chart, nor even the data that might produce it, in my copy of that publication. I am unable to explain that discrepancy.)

The agency officially continues to lay any concerns about future supply at the feet of insufficient investment. In Sweetnam’s interview with Le Monde, he put it this way: “’a chance exists that we may experience a decline’ of world liquid fuels production between 2011 and 2015 ‘if the investment is not there.’”

It’s a weak position to take in the wake of the oil price blow-off of 2008. The world’s developed economies simply cannot tolerate the high prices that would entice that investment (see “‘Peak Demand,’ Yes; But Not the Nice Kind”), and I’m sure the EIA knows it.

You’d think the American media would have been all over the story, as it signaled a major about-face in the official U.S. position on peak oil. As recently as 2008, the EIA’s base case scenario was for oil supply to rise through 2030, and not decline until 2090!

Yet five days later when I Googled it, there was not one story from a major domestic publication. Only blogs and the usual peak oil sites had picked it up.

In my seasoned judgment, the American media blackout is deliberate.

And speaking of media blackouts…

Media Blackout at the World’s Biggest Energy Forum

On March 30-31, the biennial International Energy Forum (IEF) summit took place in Cancun. Attendees at the world’s largest energy forum included ministers from 64 countries, members of the IEA and OPEC, and other dignitaries. In parallel, Cancun also hosted the International Energy Business Forum, attended by some 36 companies including the top executives of China National Petroleum Corp (CNPC), ExxonMobil and Royal Dutch Shell.

In short, the twin conferences were a Very Big Deal.

But when I searched Google News for stories containing the exact phrase “International Energy Forum” and published during the conference, it wasn’t until the seventh page of results that I found any stories from major American media outlets, and those stories were strictly focused on specific issues like oil and gas prices. They said not a word about peak oil.

A journalist from the oil and gas media organization Platts explained what happened on his blog. All media were barred from the IEF conference room, and exiled to a press room where the presentations were shown on monitors with no sound. When reporters asked for sound, the monitors were turned off. All sessions were then declared to be private, and the reporters that had come from around the globe to cover the conference were simply shut out.

According to journalist Matthew Wild, the presentations included one from PFC Energy titled “Unpacking Uncertainty: Investment Issues in the Petroleum Sector.” The document reviews three forecasts for oil supply: The IEA’s, which shows it reaching 109 mbpd by 2030; OPEC’s, which expects it to reach 111 mbpd; and PFC’s own, which expects supply to peak around 2020-2025 at 95 mbpd, then decline to 90 mbpd by 2030.

Although it sees the decline of mature fields proceeding at a slower rate than the IEA, PFC Energy still believes it will be “rapid enough to produce a world energy picture that differs vastly from previous long-range energy assessments,” and goes on to explain:

This is not a world of “peak oil” where global hydrocarbon potential is exhausted, but rather of peak production, where the petroleum industry’s ability to continue to increase—or even maintain—production of conventional oil (and eventually gas) is constrained. Exploitation of unconventional oil will provide additional liquids, but in all probability only at increasingly higher costs, and it will depend on significant investments to develop appropriate technologies to convert today’s resources into tomorrow’s reserves.

The exact timing of both the plateau and onset of irreversible decline will be influenced by the factors that determine long-term changes in supply and demand. Nevertheless, the challenge is coming, and this emerging world of limited conventional production will require major adjustments on the part of both consumers and producers.

The phrasing of the first statement is curious. Serious observers know that “peak oil” has never meant the exhaustion of hydrocarbon potential, and has always meant the peak of production flow rates. I covered a presentation by Michael Rodgers of PFC Energy at last year’s peak oil conference, so I must believe that PFC Energy knows better than to characterize peak oil that way and simply chose to do so for the appeasement of its IEF audience.

In any case, we now know that the world’s top energy ministers have seen a serious presentation on peak oil, and heard the warning about its seriousness, albeit a somewhat soft-pedaled one.

Most reports on the conference featured the theme that better data and transparency on reserves reporting is needed–a bell that peak oil mavens like Colin Campbell have been ringing for over a decade. Without it, the world is in the dark about the true future of oil supply.

To reinforce that point, IEA head Nobuo Tanaka told the Financial Times at the conference that it has invited China to join the IEA because global oil demand has shifted to the East. “Our relevance is under question,” he worried, as the opacity of data on Chinese oil demand and inventory threatens to blind the agency to the true state of the world’s oil markets.

Another key theme was an evident widespread concern about the volatility of oil prices. By the end of the conference, IEA, OPEC, and the IEF were expected to announce a “joint action plan” to control volatility and ensure that prices remain stable enough to encourage new production.

While the IEF was under way, the chairman of the Intercontinental Exchange (ICE) told Reuters that blaming speculators for price spikes was a “crutch” used to avoid looking at the realities of oil supply and demand. As I explained in July 2009, traders have turned to the ICE to skirt the stricter position limits on the NYMEX. The Commodity Futures Trading Commission (CFTC) has now proposed new regulations to limit the influence of speculators in the energy markets, which are up for public comment until April 26.

You (Still) Can’t Handle the Truth

By any measure, March was a watershed month for the truth about peak oil.

Estimates on the timing of the peak have narrowed dramatically, and now center on the 2012-2015 time frame. The range of estimates on the peak rate of production remain a bit broader and shrouded in caveats, but they are rapidly drawing closer to 90 mbpd. And the globally averaged, post-peak annual decline rates are settling in around 2%.

In other words, industry and governments appear to be coming around to what my call has been all along: 2012, at 90 mbpd or less, then declining at about 2.5% per year.

Now we know that the oil and gas industry, and the world’s governments, are not only aware of the peak oil threat but deeply worried about it. Worried enough to huddle behind closed doors, away from the press. Worried enough to formulate plans to control price volatility. Worried enough to agitate for more transparent data. Worried enough to begin planning for a future of relentlessly declining energy.

But not worried enough to tell the American people the truth–not just yet.

Until next time,

Chris

P.S.: Eleven days after I wrote this article, another peak oil bombshell dropped: The UK’s Guardian reported the U.S. Joint Forces Command had issued a report warning that “By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day,” with significant economic and political impact.  Again, there was virtually no coverage of this stunning statement in the domestic media. Even so, the jig is clearly up.

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