Without further ado:
"The day was a long time in coming. For many months now, world oil production has remained essentially flat and world oil exports have fallen while world oil prices just climbed and climbed. Poor country after poor country was priced out of the market and world oil stockpiles started to melt. Yet as the world lurched towards the mother of all economic crises, the major media of the country led by Wall Street’s own Journal remained strangely silent.
From time to time they would report some good news such as “billions of barrels found 25,000 ft under the Gulf” or “steaming out sticky oil will save us.” However, they never got around to asking what is involved in extracting oil from deepwater wells or just where all that tar melting steam was coming from. Anyone who questioned that oil production could keep on growing for the foreseeable future was castigated as lunatic fringe.
This make believe world finally came crashing down on Monday when the Wall Street Journal published a front page story admitting there was a big, big problem with oil production just ahead. Now the flagship of economic journalism does not come to such a decision lightly. To admit that you have been dead wrong in ignoring the most important economic issue the world is likely to face in the next century certainly strains your journalistic credibility.
There must have been hours of agonized meetings in the offices of senior Journal editors as they hashed out just how to break the news that world oil production was about to peak without admitting that the world is arriving at peak oil.
The solution turned out to be rather ingenious. Write a story about a new kind of “plateauing oil” that has just been recognized while continuing to bash the old “peak oil.” Sophistry? Of course, but it enables the Journal to maintain that all important face.
The title of the Journal’s story sets the stage “OIL OFFICIALS SEE LIMIT LOOMING ON PRODUCTION.” The first sentence carries the message “A growing number of oil industry chieftains are endorsing an idea long deemed fringe: The world is approaching a practical limit to the number of barrels of crude oil that can be pumped every day.”
There you have it. The story is not portrayed as “evidence is growing that world oil production will soon go into decline.” It turns out that the real news is that an increasing number of oil-industry leaders are afraid that the world is approaching “a practical limit” on oil production. “Practical limit” is a nice touch which sweeps a number of issues under the rug.
To give the Journal its due, right up front they lay out the magnitude of the problem: “The world certainly won't run out of oil any time soon. And plenty of energy experts expect sky high prices to hasten the development of alternative fuels and improve energy efficiency. But evidence is mounting that crude-oil production may plateau before those innovations arrive on a large scale. That could set the stage for a period marked by energy shortages, high prices and bare-knuckled competition for fuel.”
After so much honesty the Journal, unfortunately, falls back into its old ways by attempting to make a distinction between what it is telling us as news and the old “peak oil theory.” The following paragraph from the Journal’s story is a gem.
“The current debate represents a significant twist on an older, often-derided notion known as the peak-oil theory. Traditional peak-oil theorists, many of whom are industry outsiders or retired geologists, have argued that global oil production will soon peak and enter an irreversible decline because nearly half the available oil in the world has been pumped. They've been proved wrong so often that their theory has become debased.”
“Proved wrong so often?” “Debased”? As could be expected, peak oil adherents were apoplectic at these words. The web was instantly populated with reasoned refutations and charts which ask, “What on earth are they talking about?”
The answer probably is in the way large institutions such as the Journal pass important stories through layers of editors – not just to get the commas right but to insure political correctness from the paper’s perspective. The “debased” paragraph plays such a discordant note, it can only be a political afterthought from management.
The story then goes on to explain “plateauing” oil. “The new adherents...don't believe the global oil tank is at the half empty point. But they share the belief that a global production ceiling is coming for other reasons: restricted access to oil fields, spiraling costs and increasingly complex oil field geology. This will create a global production plateau, not a peak, they contend, with oil output remaining relatively constant rather than rising or falling.”
Once the story gets beyond the “face saving” it does a credible job in explaining why the world will soon be facing a major shortfall in oil production: “The emergence of a production ceiling would mark a monumental shift in the energy world.” The “expanding pool of oil, most of it priced cheaply by today's standards, fueled the post-World War II global economic expansion.” “Since 1990, despite billions in new spending, the industry has found only one field with the potential to top 500,000 barrels a day.” “Some of the most promising geological formations are in locations that are inhospitable, for reasons of geography or, especially, politics and strife.” “Labor and construction bottlenecks also are making it difficult to develop proven fields.”
The Journal’s story marks an important turning point in the public’s understanding of peak oil. Now that the ice has been broken by the flagship of the financial press, it will not be long before others muster the courage to explore and discuss the ramifications of “plateauing” oil. This cannot be a bad thing for as the notion that we are entering the greatest paradigm shift of the last 100 years sinks in, people can start preparing for it."
End of essay by Tom Whipple.
16 comments:
Whipple has been writing the same thing for years, and that is probably why the WSJournal and other Type-A Trader Republican personality fatheads can continue to ridicule the whole peak oil thing. When, oh when, is the Apocalypse going to start??? Front page notwithstanding, no one is going to give a damn about peak oil till the pump prices and heating bills start gyrating wildly. But the prices aren't going to increase much since we know what happens when they do (from 2008: higher prices = slows economy = cuts oil demand = lower prices). Whipple and the WSJournal are just doing their jobs, but no one is talking about peak oil ... yet. Time to make your money!!!
Oil prices are only reasonable to those that still have their old job at their old pay rate. It’s price relative to income that matters- demand didn’t collapse due to revulsion.
Bureaucrat; 'from 2008: higher prices = slows economy = cuts oil demand = lower prices'
That works except when you have China and India picking up the slack each time the price falls. Like now; 78$ even though USA imports down around 10%.
SO Bureaucrat your basically saying, because Whipple and others have been warning about the bumpy plateau and the inevitable decline for many years, and although we have ONLY hit the worst economic crisis since the great depression so far and despite oil production having flatlined for 6 years, because there are not horses of the apocolypse riding around, he is basically just crying wolf?
I think for millions of people right now their own personal apocalypse HAS hit them with full force.
The wolf is clearly circling and thanks to him and others people are slowly but surely starting to realise the predicament we are in.
This is at least surely a valuable first step to dealing with it.
Meanwhile, every gas station is full and operating, and the natural gas wholesale price is back down to $4.5 per million BTUs. If and when China and India come roaring back (and some people don't think they will), we can talk about possible oil price shocks. In the meantime, the point of my original post was: if you keep harping on a negative theme that hasn't come to pass yet, people will continue to mention how you have expected something terrible to happen that apparently hasn't happened yet .... for YEARS!
..but it has to come to pass, are we not in a chronic global recession/depression with high oil prices having been part of the catalyst for the crisis?
Bur:
"Meanwhile, every gas station is full and operating".
My brothers are in the gas station business (go see them at barrier.com). They have closed many of their stations, and in the past 5 years the number of "gas stations" has declined about 20%. Some of this is from the economies of scale that larger stations deliver at the expense of smaller stations. Much has to do with the price of gasoline making inventory financing impossible for the little guy - and IF the import decline remains apace you will see many more gas stations bull dozed to the ground.
Bur, not to repeat a ridiculously trite, old story, but don't forget the sage about cooking a frog, you know, you turn the heat up slowly after putting him in, rather than plopping him the already boiling pot lest he realize what's going on and jump out (if he can jump out.)
As both Greg and oOOo are basically saying, the heat is already on and the water is coming up to temp. quite nicely.
Or, to use another trite, old saying (if I have the nerve), a recession is when your neighbor loses his job and a depression is when you lose yours. I guess it's fairly well known that not many government bureaucrats have been laid off yet.
1) No Federal bureaucrats have been laid off that I know of ... yet. :) I actually had an interview for a promotion yesterday. I won't get it.
2) The oil production plateau has been for 4 years (since 2005), not 6. Let's not make things worst than they are.
3) My numbers, off the top of my head, says we used to have around 190,000 gas stations in the U.S. and now we have 165,000. They are disappearing, whether it is 20% or not -- I can't add. :) But a lot of these stations were NOT prepared to spend boku bucks to be in environmental compliance. Also sometimes their property was turned into buildings (it was that way in downtown Chicago). And remember, there is no profit in selling gasoline anymore, due to ferocious competition. All the profit today is in selling snacks (and car washes).
4) The boiling frog -- yes, I know we have oil (and gas) depletion. I also know that everyone reading this will be dead in 60 years. So what? We are swimming in energy right now, and there is a valid argument that says that if the Western world doesn't start buying more crap, China and India, and all their plans to become "Americans," will wither on the vine. I have a little $ in China anyway, just to be sure. :)
Bue:
Since you have contracted yourself, you must have seen the point. Saying "the gas stations are full" is anecdotal. Saying "165,000 gas stations are full" and 25,000 are no more is empirical. I might add that i be your data is old, and the number is 150k -155k, but that is splitting hairs.
When we are down to 100,000 gas stations will you still claim that since they are full, there is nothing to worry about? Maybe at 75,000... or 50,000?
All that will be reflected in the prices and the lines, as you know. For the present, I check 15-20 gas stations most days in Chicago for my chicagogasprices.com data submission. All their prices are (high and) similar. And if you want gasoline, they will pump as much as you want to pay for.
A lot of those closed stations had tanks in the ground that were leaking oil products, and they knew it would cost a lot of money to fix that problem. They are better off closed. Less ground water pollution. A Mobil in downtown Chicago disappeared, and became an academic building. :)
A problem with the gasoline supply will be made evident by the prices and the lines. Today if you want to go to any gas station in Chicago, they will sell you as much gasoline as you want to pay for. I check 10-20 gas stations most days for my data submissions to chicagogasprices.com, and they are all working splendidly.
The closed gas stations knew it would cost a lot to comply with new regulations (1990s) for leaking underground oil products storage tanks. They are better off closed. Less oil dripping into the ground water. The one Mobil in downtown Chicago disappeared and became an academic building. ;)
I contracted myself???? :)
That was my inner GWB!!!
"Contradicted"
Bur:
I cannot believe I am going to respond... but OK, I'll bite.
Here's the deal. There is no shortage of $80 Oil. THere is a glut of $100 Oil, and an absolute dirth of $50 Oil.
There will NEVER be a gas line unless the government enacts price controls. THe reason you saw them in the 70's is our government rationed by something other than price.
Oh, come on respond! I like the attention. :)
It's funny there even was gasoline rationing in the 1970s. Of the four major U.S. import sources way back then, the U.S. didn't even import oil from the Middle East in those days. We imported from Canada, Mexico, Indonesia and one other country. The oil embargo "scare" was phony.
(But the French imported a LOT of oil from the Middle East in those days. It scared them so much they overdosed on nuclear so that they are now the world's #1 electricity-from-nuclear country -- 80%.)
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