[NYTr] Why 'peak oil' may soon pique your interest (CSM)

[All the News That Doesn't Fit]

Christian Science Monitor - Aug 6, 2007
http://www.csmonitor.com/2007/0806/p15s01-wmgn.html

Why 'peak oil' may soon pique your interest

World oil production peaked in 2005, says one expert, 
and that presents serious problems in the future. 

By David R. Francis

Do a Google search of the Web on "global warming" and it calls up more
than 80 million references. Search for "peak oil" and the number
exceeds 10 million.

In two years or so, world concern over crude oils supplies should be so
great that a Google search on that subject probably will top that of
global warming, predicts Matthew Simmons, chairman of Houston-based
Simmons & Company International, an investment banking firm for the
energy industry.

Peak oil refers to the time when production of crude oil in the world
(or in a country or in an oil field) reaches its peak and starts to
slide. It doesn't mean the world has run out of oil – only that the
supply of oil isn't rising to meet growing demand. That change could be
reflected in even higher prices, if the demand for oil doesn't stall or
fall.

Last Tuesday, the price of oil futures on the New York Mercantile
Exchange set a record, rising as high as $78.40. That exceeded the
previous high of $77.03 set in July 2006 at the onset of Israel's war
in Lebanon.

The world output of oil actually already peaked in May 2005 at 74.2
million barrels a day, says Mr. Simmons. Since then, production has
fallen about 1 million barrels a day (MB/D). If that trend continues,
the results for the world economy will be "so real, so devastating"
that peak oil concerns will overwhelm slower-moving global warming in
grabbing world attention.

That's because today's civilization hangs heavily on an adequate supply
of oil. It, for instance, fuels most vehicles, heats many homes and
businesses, and is used in many chemicals and plastics. Oil and natural
gas now meets some 60 percent of the world's primary energy needs.

Oil shortages, warns Simmons, could lead to war.

Dr. Fadhil Chalabi, executive director of the Centre for Global Energy
Studies in London, isn't so pessimistic. He notes that with higher
prices, the demand for oil has started to fall, at least in the 30
industrial nations belonging to the Paris-based Organization for
Economic Cooperation and Development. Since 2006, their demand has
dropped by about 400,000 barrels a day. And the demand for crude in
bustling and populous China and India rose only 0.7 percent last year.

His research institute forecasts world demand will rise "not more than
1 percent a year." Other researchers predict 1.4 to 1.5 percent a year,
a significant difference. 

Mr. Chalabi says forecasts for the world oil industry cannot be relied
on, having proved wrong in the past. Today's forecasts do not fully
take into account the impact higher prices have in reducing demand and
encouraging alternative energy sources, he adds.

However, concern over the world's oil supply is mounting. Last month,
the International Energy Agency (IEA) issued a report warning that
world oil demand will rise faster than previously expected. The result
could be a supply crunch – "extremely tight," one IEA economist told
the BBC. The report sees world oil demand soaring 2.2 percent a year to
95.8 MB/D by 2012. That's up from the 2 percent annual growth rate it
forecast in February.

The Paris-based IEA advises 26 industrial nations, and, in Simmons's
view, it now has a more realistic chief economist, Dr. Fatih Birol. So
the agency, Simmons says, is no longer "a cheerleader for cheap oil,"
always saying crude oil supplies are so large that oil prices will
surely fall.

In July, the National Petroleum Council, a federal advisory group
representing the oil industry, published a 476-page study titled
"Facing the Hard Truths About Energy." Simmons, one of 350 participants
who prepared the study, holds that its wording is not stern enough
considering the statistics on the oil demand/supply situation it
includes. The study states, "The world is not running out of energy
resources, but there are accumulating risks to continuing expansion of
oil and natural gas production from the conventional sources relied
upon historically."

Simmons uses such terms as "hogwash" and "junk report" in describing
the study.

For years, many in the oil industry viewed the peak oil forecasts by
Simmons as odd. Now his position has a lot of company. Several websites
publish sophisticated material on the issue. There's the Oil Drum
(www.theoildrum.com), featuring "Prof. Goose" and "Gail the Actuary."
Those pseudonyms hide a full professor at Colorado State University and
an actuary in an Atlanta suburb. There's also the Energy Bulletin
(www.energybulletin.net). The site's coeditor, Bart Anderson, say it
receives 11,000 visits a day. Peak oil enthusiasts, he says, have now
divided into a majority seeing life after an oil crunch and those he
calls "doomers."

In Britain, Douglas Low, director of the Oil Depletion Analysis Centre
(www.odac-info.org), foresees a "crisis coming up" with a real shortage
of oil. In June, he notes, the world used 1.5 MB/D more crude than it
produced. He expects much higher oil prices in the future.

"It's not a very happy message," he says. "A lot of people want to slip
it under the carpet."