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Good news from Michael Lynch, appearing August 24 in an op-ed in the New York Times. This whole oil scarcity idea is really off – by a factor of 5, to be exact. Lynch says the consensus among geologists is that there are 10 trillion barrels of oil out there, not a mere 2 trillion, so – relax! Oil is abundant.
My relief is palpable. For a while there I thought oil rigs might appear off American coasts or invade ANWR. Or that we would continue to raze mountaintops to burn climate-ravaging coal. Or cause horrendous environmental damage by cooking tar sands. But now we can ease off on all that, because oil is abundant.
I do wish, however, that Lynch had settled a few issues he raised, such as why, if oil is so abundant, we keep having to dig deeper and deeper to find less and less of it. And why the advanced extraction technologies he mentions have failed to reverse the decline of even the world’s best managed oilfields. And when exactly our technology will advance to a point that makes “easy oil” out of fields miles down in deep ocean, because right now oil companies are finding it prohibitively expensive and risky.
Truth is of course that the “abundance” of oil is irrelevant if you can’t actually produce it when you need it, or get it for yourself when others produce it. The world has an abundance of food, yet something like 1 out of 6 people is hungry and 25,000 children die of hunger every day. And food is dead easy to make and transport compared with oil.
This article in the Financial Times says that the threat of an oil shortage is real: in their words: “we are now of the collective view that peak oil is a high-risk, high-consequence issue.” Read and decide for yourself what will happen to the price of oil in the next few years. Creative Commons photo by ccgd via Flickr.
A leading energy economist in the International Energy Agency reported today, in an interview with The Independent, that the world’s oil supply has been depleting almost twice as fast as their 2007 projection, and that an energy supply crisis is looming in the next five years that will choke off any economic recovery.
“We have to leave oil before oil leaves us,” said Dr. Fatih Birol of the IEA. “The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously,” he said.
It’s been over two years now since the World Without Oil game got people to collectively imagine our next oil crisis, and prepare for this day. For a video tour of your near future, try the official WWO videos by Kalwithoutoil. To see the full WWO archive, go here. Or for your own little refresher course in how to survive an oil crisis, review our WWO lesson plans? Photo by Napalm filled tires
An article in the WSJ thinks maybe not, and I agree. As noted in a NYT article last month, OPEC has succeeded in cutting production and stabilizing prices. As the price of oil climbs steadily back up to the level that held when we played the World Without Oil game, even in the face of a global recession and shaky demand, one has to wonder if we played it and now it’s time to live it…
Via Philip Trippenbach’s blog, I found OILIGARCHY, a fun (and instructive) little flash game by WWO friend Molleindustria. Or should I say, “a playable commentary on the oil industry” as Molleindustria terms OILIGARCHY in their excellent dissection of their own game. OILIGARCHY, it seems to me, is a model for these types of games in that it’s transparent about its biases.
My own play result surprised me a bit, in that I did “good.” I dispossessed and killed relatively few people, and left ANWR and Iraq alone. At game end, I weaned America off its oil addiction, set it on a course toward a better and sustainable quality of life, kept my board of directors happy (and if not happy, more perplexed than angry) and even made a killing (which Molleindustria points out is not hard) and retired happy. Instructively, the secret seemed to be (spoiler): I declined to spend cash to rig the U.S. political system. Hmmm….
As gas prices dip below $2 a gallon in parts of the U.S., the question arises: will Americans be fooled? Not if they actually pay attention to the forecasts: “Although prices may stay low for a time, ‘it is becoming increasingly apparent that the era of cheap oil is over,’” says the Financial Times about a report to be released this week by the International Energy Agency, according to this report from IEEE Spectrum. The IEA forecasts oil back to $100 a barrel and up as soon as the recession-caused glut passes.
Long-term, the IEA forecasts oil rising to $200 a barrel by 2030 – or it would forecast such a future, except that, in their words, “current global trends in energy supply and consumption are patently unsustainable.” As Bill Sweet of IEEE goes on to explain, “ultimately the IEA is saying that what it is predicting to happen will not actually happen because it cannot happen.” The IEA is acknowledging that you cannot just extend the graph out for another 20 years, that the reality the graph depicts derails the graph’s own underlying assumptions about prices, economic and population growth, and so on.
This is a remarkable statement, and worth repeating: the world’s energy “business as usual” will not survive for two more decades, and the energy infrastructure as we know it will be changed by the turmoil caused by market pressures on oil supply. This of course is not news to those familiar with the World Without Oil game. But it is news to see it openly said by as august an agency as the IEA. Lesson: it’s not a moment too soon for the U.S. to embark on radical reconsiderations of its energy future (pdf). Photo by maistora via Flickr.
It’s my last day of vacation here in Arlington, Vermont, where gasoline is $3.79 a gallon or so (it’s still over $4 back in Cali) and the winters are long and warmed with fuel oil. Our hosts had friends over last night, and I asked a man named Hamilton what the winter would be like. “Cold” was his laconic answer.
At current prices, winter can cost residents here $6000 or more in fuel oil. Hamilton went on to relate that a fuel-oil supplier he knew was already carrying about $750,000 in debt from last year, when suppliers faced customers unable to pay who are facing freezing temperatures. Who will step in this year, I wonder. And the next, and the next.
Meanwhile, an article in the New York Times describes how schools across the nation are dealing with the triple whammy of skyrocketing fuel costs and more foreclosures and the recession: cutting bus service; cutting hours (and in some cases, days); restricting travel; generally saving money any way they can. “The big national picture is that food and fuel costs are going up and school revenues are not,” said Anne L. Bryant, executive director of the National School Boards Association, according to the article.
As the school year begins, teachers will be playing oil mini-crises with their students in their classrooms, using the World Without Oil lesson plans. Students not of driving age may have difficulty relating to gas prices, but underheated houses and four-day school weeks will connect them more directly, alas.
In the World Without Oil game, the players imagined what would need to be done if petroleum suddenly became more expensive or otherwise hard to get. In the game, the players wrestled with cutbacks of essential services. What does it say that schools across the country are going to four-day weeks? The oil crisis of 2008 continues. Photo by bitzcelt via Flickr.
We got a friendly email from Kathryn Blume, who’s touring with The Boycott, her update of Lysistrata for the twenty-first century. In the one-woman play, the First Lady of the United States launches a nationwide sex strike to combat global warming.
Blume: “If you let yourself stop to think about it, climate change is an incredibly scary thing. But most people don’t let themselves think about it. The Overwhelm Factor is just too much. So having someone who can stand up in public and admit their fear, but then also tell a really funny story about the whole situation can be an incredibly cathartic experience, and inspire people to start taking action.”
The World Without Oil game had a similar premise for its approach to oil dependence – we also used “what if?” game play to get around the Overwhelm Factor – but frankly we could have used some more of Kathryn’s humorous approach. Maybe Oliver Twist could be updated for the post-oil era? “Please, sir, can I have some more?”
Another WWO pre-ja vu moment this week, reading this article by Megan Stack of the LA Times about Hugo Chavez’ visit to Russia, and what can only be described as the petro-drunk antics that he and Vladimir Putin indulged in. The two oil-rich nations signed energy security agreements, oil business deals, and arms deals, and expressed a common interest in establishing the ruble as a major reserve currency, replacing the dollar. The two spoke of Fidel Castro and waved off a report that Russia would begin to use Cuba as a base for nuclear-capable bombers.
These real-world actions mirror what players of the World Without Oil game foresaw as happening: the rise of a new world petro-order. And just to slam the point home, read this article by Norma Love about New Hampshire’s abrupt u-turn regarding Venezuelan oil. The upshot: for a number of years Chavez has offered free oil to keep America’s poor warm in the winter; New Hampshire has refused it on principle, led by Republican Senator John Sununu; except this year, not so much. “Live Free or Die,” except when it’s oil.
Made poignant by the fact that Gracesmom, probably WWO’s most beloved character, was a young single mom living hand-to-mouth in New Hampshire.
The turn of events points up something else that WWO got right: the government’s paralysis, and especially the Administration’s. Looking at the dive in oil prices the day after Al Gore issued his energy challenge only serves to highlight how unable the Administration is to generate any vision of a way forward. Thanks, Laurel, for the lead!
The credit crisis is grabbing the headlines in America, as Fannie and Freddie starve on the empty calories of their bad loans, IndyMac Bank goes into federal conservatorship, and so on. The latest Harper’s Index gives the underlying numbers:
Chance that a U.S. home is currently vacant: 1 in 35
Rank of this among the highest recorded vacancy rates in U.S. history: 1
An article in The Economist (July 12) backs up the numbers: 18,600,000 U.S. housing units stand empty. It goes on to say that “formerly vibrant neighborhoods have taken on the dilapidated air of ghost towns” and “municipal taxes go unpaid” and “boarded-up homes invite looting, drugs and other criminal activity” – all outcomes foreseen in the WWO game. What we didn’t foresee: that cities would respond by demolishing the homes. But that’s actually being contemplated, according to the article.
The media hasn’t yet connected the 2008 credit crisis to the 2008 oil crisis, but again WWO teaches us the connection is there. As explained in an earlier post, the Petro Razor is at work here. Communities with forced commutes are on the wrong side of the Razor are likely never to recover; I’ve already heard anecdotal evidence that this process is underway.
Meanwhile, in a short article on Page 10A, we learn that Russia has reduced oil flow to the Czech Republic without warning or explanation. The move comes three days after the CR inked an agreement enabling the U.S. to build a missile-tracking radar station on Czech soil, So now begins the petropower plays among nations, also foreseen in WWO? The event that set off the global oil crisis was this: oil suppliers “unilaterally renegotiated their contracts,” delivering less oil than promised, which is exactly what’s happening to the Czech Republic. So is this a one-off, or a canary going thud in the coal mine? Stay tuned. Photo by judepics via Flickr.
“Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries. What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction.” (The World Without Oil game, ahem.)
The “Asleep at the spigot” article in the New York Times goes on to show just how the U.S. has gotten itself out on the limb as far as it has – and who led us out there – it’s good reading for those who hope we don’t get fooled again.
Plus I’ve got an excellent article summarizing the global oil situation, also in the NYT, courtesy of reader PeakProphet. It’s 2 months old but still nails it. (Image from the New York Times)
Courtesy of New Scientist, an interactive graphic about oil flows (and chokepoints) across the globe. Nice, but I wish it had included how oil flows will be changing in the next ten years… and I can’t believe their security risk assessment does not mention Nigeria at all, where oil flows are regularly disrupted by rebels. Most recently, a few men in a speedboat managed to take about 200,000 barrels a day off the global market.
People in the U.S. are starting to talk about drilling again – in ANWR, off the coasts, anywhere – and that always makes me think of Frank Sinatra. Or more precisely, his performance as a heroin addict in the movie The Man With The Golden Arm.
People who want to drill for more oil are like the addict who in desperation steals his child’s piggy bank to get a fix. This is almost a perfect analogy. Except that the addict who steals his child’s money to get a fix actually gets the fix. People who push for more drilling probably won’t. If they would only examine the reality of that future:
1. No oil will actually be produced for about 10 years.
2. When it is produced, it will be sold at market rate to the highest bidder.
3. When it is produced, it will be a trickle meandering through a mostly dry riverbed. The world will be running on 20% to 50% less oil than it is today, and the new oil won’t even offset the continuing slide.
So the perfect analogy would be the drug addict who steals his child’s piggy bank to pay a runner who will go off for ten years then return with a tiny bag of dope which he will sell to the person who can best afford his astronomical price. Someone who can afford to pay multiple times what we are paying now.
So I can understand why owners of private jets are all for drilling, because they have a huge sum invested in their jets and you’ll never fly a jet on alternative power. And of course Big Oil is pushing for it (played by Darrin McGavin in the movie). But for the average person, drilling makes no sense. But then, neither does addiction.
I’m mulling this morning over the similarities between the subprime mortgage crisis and the high fuel price crisis. Both strike me as little garden paths that the unwary were led along, by people willing to make a buck over the inability of others to visualize the future.
In both cases, people were sold a dream of the unaffordable made affordable, and sold the products that go with it: big new homes in the suburbs and plush low-mpg vehicles to make their long commutes comfortable. Now however the payment rates are being radically readjusted and the balloon payments are coming due. The purveyors of this dream – the subprime lenders of U.S. energy policy, the oil and auto companies and others aided and abetted by a subprime administration – are escaping with their gains and leaving people made destitute by their deception.
What’s needed is action that materially reduces our dependence on oil forever – higher fuel efficiency, plug-in hybrids, alternative energy. Solutions such as drilling for more oil are merely a continuation of the cruel deception. For starters, it will take about 10 years for any new well to actually produce any oil – no help whatsoever to those being squeezed hard right now by high fuel prices. But the main point is: more oil, from any source, amounts to no more than taking out a second mortgage on a subprime energy policy, something that only puts the inevitable foreclosure off another year or two.
….possible within two years, says Sachs Goldman via Bloomberg and widely reported. Folks, less than a year ago “$200 a barrel” was shorthand for catastrophe. Witness our fellow simulation, OilShockwave, which in September 2007 posited a global geopolitical crisis precipitated by oil at $150 a barrel.
Here they are again: real-life headlines that look as though they come right out of World Without Oil. I don’t want to see headlines like these. The question is: is the WWO game helping people adjust to the new economic reality they describe? And – is the game helping to create other realities as well?
I’m in Phoenix, looking for WWO-worthy headlines in the Arizona Republic, and finding them. Front page box item: “Gas prices continue to top records.” The box blurb mentions an Iraqi pipeline bombing and cutbacks by refiners as causes for the inexorable march of gas prices, but of course that’s hogwash (the pipeline will be fixed in the next day or so, and the cutback by refiners is due to shrinking gasoline demand in U.S. local markets). The article itself (top story, Business section) barely mentions the true cause: oil prices still over $105 a barrel. They spend a whole paragraph talking about the refinery cutback, terming it “troubling,” but why? Refineries cut back when local demand lessens, nothing sinister about it. World demand isn’t decreasing, not if China has anything to say about it, and as long as that’s true the fundamental price of oil will stay high.
The rest of the article is quotes from drivers, and it’s all pure WWO: “Gas prices have really impacted our budget.” “We might not be able to take a vacation this year.” “I’m taking the bus and riding my bike more.” “I used to go back to Chinle, my hometown, every two weeks – now with higher gas prices, I only go up once a month.” Is this not a game?
From WWO fan Laurel K.: an interactive tool to graphically display the relationships among candidates and oil interests. The 2008 campaign is of course relevant, but if you want to acquire a deep understanding of why we are in this handbasket and where its trajectory came from, select the 2000 and 2004 elections and click “Find The Oil Money!” (thanks Laurel!)
Revealing AP article today by John Wilen, highlighting the trouble that US consumers find themselves in today: gas prices are going up, no matter what. And increasing fuel costs mean that the price of everything goes up, no matter what. Under price pressure from all sides, US consumers are “combining errands, sharing rides, eliminating pleasure trips and using public transit more” in an effort to control the cost of fuel on their budgets. But what’s not happening is any decrease in fuel prices commensurate with the decline in fuel usage. Gas usage is off by 1% in the past 8 weeks, instead of its usual 1.5% growth (to keep up with population growth). But gas prices have only retreated by a few cents in recent days. The result: a father in Pleasanton, CA, is considering cutting swim lessons for his kids. Which may not seem like much, unless you’ve played World Without Oil and recognize that this is how it all begins.
Not discussed in the article: the Tata Motor Company, which seems set to buy Jaguar and Land Rover from Ford. Tata is famous these days for the Tata Nano, a marvelously inexpensive car that seems destined to escalate India’s oil consumption at a rate commensurate with its economic growth. Why would cutting oil demand in the US reduce prices, when demand is increasing elsewhere? World oil consumption is expected to grow by 1.3 million barrels a day in both 2008 and 2009, according to the EIA update of March 11. (photo by goatopolis)
…the price of gasoline in the U.S. broke records, pushed higher than it’s ever been by the high cost of oil (now at $110 a barrel) and the ever-weakening dollar. “Analysts see little reason for the dollar to stop falling, or for oil and gas prices to stop rising, any time soon.” “Strong global demand for oil will keep prices high despite a downturn in demand in the U.S., two prominent forecasters warned.” Was this not a game?
It’s a sign that investors think that crude oil prices “will keep climbing despite evidence of plentiful supplies and falling demand,” says John Wilen of AP. He goes on to say, “The fact that there was no overriding reason for such a price spike could be a bad omen for consumers already bearing the burdens of high heating costs and falling real estate values.” The reason: investors are moving to the oil futures market, driving up prices, as a hedge against the falling dollar. (And let’s not forget: demand from China and India continues to forge ahead, even as the U.S. economy sputters.) The Energy Department said that it expects gasoline prices to peak this spring well above the record – $3.227 a gallon average – set last May when the WWO game was going on. When, it should be noted, oil prices were “only” $65 a barrel.
Oil prices up over $2 a barrel, to $93 or so, upon tumults legal and illegal. In Venezuela, Hugo Chavez reacted with threats when a British court ordered over $12 billion in Petroleos de Venezuela SA assets frozen (PDVSA is Venezuela’s state-run oil company). In the Niger Delta, unidentified attackers fired on a vessel escorting oil workers, killing a sailor, and furthering fears that Royal Dutch Shell will lose yet more production in Africa’s largest oil-producing nation (an earlier attack on a Nigerian pipeline has already taken 130,000 barrels of oil a day off the market, possibly for months). To WWO players, this all seems familiar, as players forecast similar events in Venezuela and Nigeria during the game . . . especially since the nationalization of a multi-billion Exxon-Mobil facility in Venezuela (the action that caused the British court order), occurred in real life on Day 2 of WWO.
The saying goes: If you owe the bank $10 billion, the bank owns you. If you owe the bank $10 trillion, you own the bank. That is, you owe so much that if you default, the bank goes under too.
Since the USA consumes one out of every four barrels of oil produced in the world, we own the oil bank, so to speak. Or thought we did, maybe, until yesterday, when President Bush went to Saudi Arabia, met with King Abdullah, and asked him to please produce more oil or else the US economy would slow down and thus we would buy less of his oil.
Leave aside for the moment the absurdity of anyone giving the King of Saudi Arabia a lecture in Economics 101, and focus on what this means: Bush is saying “we buy so much, we own the bank.” The Saudi response? According to an article in the New York Times, the Saudi oil minister said that Saudi Arabia shared Bush’s concern that a recession in the US would have profound effects, but “Saudi Arabia would raise production only when the market justifies it.” In short: “No, Mr. Bush, actually the bank owns you.”
Quite understandable, from the Saudi point of view. Why invest money in additional infrastructure and sweat to pump a gallon of oil to sell this year at $100, when without any additional effort you can pump that barrel next year and sell it for $150? So what if the US goes into a recession and buys somewhat less oil? China and India are standing by, cash in hand. And the World Without Oil scenario continues, scarily, to become more real.
A good catch today by Gracesmom (Marie Lamb): Thieves take truck, gallons of oil in the Kennebec, Maine area. Eerily reminiscent of many reports we got in WWO…
“CHINA has urged local governments to set up an early-warning system to ensure sufficient oil supplies at filling stations, which face shortages across the nation, the state-run Xinhua News Agency has reported…” So says The Australian, here. Is this not a game?
“The current surge in the price of oil is certainly not driven by a conviction that oil supplies have peaked and can only decline from now on. The dealers in the London and New York exchanges who make the market react to the daily flow of news and don’t bother much about longer term issues like peak oil. The market is a simple-minded beast: Supply is tight and disruptions are possible, so the price goes up. But the market is so tight because demand has been growing faster than supply for years, and now the fear is that supplies may have stopped growing altogether.” Read the rest here.
As reported today in the WSJ. Just as a reminder, when WWO launched, oil was less than $70 a barrel. And gasoline prices were less than $3 a gallon. Ah, the good old days.
As player Warnwood told us, “the war is in words” – and here’s Michael T. Klare to parse the latest word stratagem from the U.S. Department of Energy. Be sure to read down to the part where it may become necessary for the U.S. to create “more investment-friendly environments” in oil-producing nations. As we have in Iraq?
Or so reports the Wall Street Journal today, here. Subscription required to read the whole story, but I found the first sentence pretty much says it all: “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.” 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.” Sound familiar?