October 3, 2004
The following
story comes from Al Jazeera online on Thurs., Sept. 30. In addition
to
this article,
it is interesting that it was Al Jazeera, not the U.S. major media,
that broke the story about seven oil rigs in the Gulf of Mexico being
totally inoperable due to Hurricane Ivan and another 13 leaking
oil into the Gulf. You can find that article here. I'll leave you
to draw your own conclusions.
Others in the United
States have also expressed concern about the status of oil production
in the world. Prominent among these folks is Matt Simmons, Houston
energy investment banker. He
also made comments at the ASPO Conference mentioned in the article below. Mr.
Simmons' presentation, Uncharted
Energy Sea!, as part of
the Executive Speaker Series at Texas Chistian University's M.
J. Neeley School of Business on Sept. 22 is also worth a look.
The
Man Who Foresaw Skyrocketing Oil Prices by Adam Porter In a world dominated
by self-censorship, only the brave speak out. But in a world running
on cheap energy, with all the consequences that
it brings, only those who value their integrity above their wallet
are
worth listening to.
Back in April one
man, Iranian oil and energy analyst and expert Ali Bakhtiari did
just that. He stood up and made a prediction that could
have seen him ridiculed.
"By the end
of the year we will see oil at $50 a barrel," he
told an audience at the annual gathering of the Association
for the Study of
Peak Oil (ASPO) in Berlin.
To make a prediction
that takes in record high prices is one thing. To name the price
is another altogether. But now, while OPEC, the major
industrial nations and Saudi Arabia chant their mantra that there is "no
problem," Bakhtiari seems more vindicated than ever.
"That is what
I said in April, that we would get to fifty dollars by the
end of the year. And we have arrived three months early," he
says with a
chuckle. "I think that was really quite a good prediction you
know."
Out of control
Trouble is, the
rise of oil's price range is an undoubted economic threat. Not to
the super rich, the top 1% of global earners, or the
super poor, the 50% of the world's people who live on less than $2
a
day, but to everyone else. Around three billion of us.
"
I am afraid I think the price will go higher," says Bakhtiari
worryingly. "I had hoped it would stay in the $40 range. I think,
at
that level, economies could start to cope, but now the price of oil
is
out of anyone's control."
The argument goes
that instead of planning a structure for using oil, it
has been left to the market fundamentalists to determine the future
of
these valuable biological assets.
The collapse of
oil pricing in the 1990s, as well as the weakness of the
dollar, had meant that the real value of oil was incredibly low.
As a result no
oil majors or producer nations were interested in spending billions
of dollars in new investment, because there was no
short-term profit.
Growing appetite
No one was interested
in spending billions on fuel efficiency because there was no short-term
profit. Why no one was interested in spending
billions in solar, wind or hydrogen energy is anybody's guess.
"The big economies
are just starting to get used to the idea of $40 a
barrel. We have passed that financial and psychological barrier, but
if
we moved straight into the $50 range, then that is not good at all"
Ali Bakhtiari, Iranian oil and energy expert
The same train
of thought says that as well as these factors, oil has
been physically guzzled up like there is no tomorrow.
Ironically, it
is that very appetite, growing at an exponential rate due
to demand in the USA, China and India, that could exacerbate the
problem.
Bakhtiari says, "I
hope that we don't move into a fifty-dollar range.
The big economies, and by that I mean the US, the EU, China, India
and
Japan, are just starting to get used to the idea of $40 a barrel. We
have passed that financial and psychological barrier, but if we moved
straight into the $50 range, then that is not good at all."
However, he does
not see the forty-, or fifty-dollar, range as something that will
last forever. Indeed not even for very long at all. Instead,
he says the price is being driven by something far more fundamental.
Peak oil syndrome?
"No one can
restrain the price any more. For example, everyone thought
that it would be OPEC who could manage demand. But that is now in the
past.
Now it is really
peak oil that is behind the wheel of the car. Peak oil
is driving the rise in price and demand is not the real question. We
are
entering a new era, but we are only at the very beginning of it."
The idea behind "peak oil" is
this. That, as the planet reaches the
halfway point of consuming all its available oil, then a combination
of
bullish demand, slowing fields and insurmountable supply bottlenecks
will create brutal price shocks. Almost certainly slicing the head
clean
off the world economy in the process.
This peak in oil
supply will act as an economic guillotine. Yet the thread suspending
the blade above our heads will be released without
warning.
Politicians, producer
countries, major oil companies and consumer states
are not about to announce their own demise. It would not be good for
business, or re-election, or both.
"If there
was nothing to be worried about, then there would be no price
increases," explains Bakhtiari.
"If there
is no reason to worry, because there is plenty of oil and OPEC
or Yukos or whoever can simply pump some more, then there would be
no
problems and no rises in price. The market would not be worried at
all."
Whilst Bakhtiari
admits predictions are fraught with danger, his own research, so
far extremely accurate, says peak oil has yet to arrive.
Like Hurricane Ivan blowing in from the ocean, we may only be
experiencing the first stormy gusts.
"I think the
peak will arrive around 2006, 2007. But, this is only
15 months away. That is all. At that point, no one can say what is
going
to happen. Except the price is going to go up. And no one will be able
to stop it." |
