This story was taken from Bulatlat, the Philippines's alternative weekly newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. V, No. 34, October 2-8, 2005

Philippines Ill-Prepared for Global ‘Peak Oil’

The world is consuming more than what is available. This is not in reference to food, but oil. Experts say that no new major oil discoveries are expected in the future, but the addiction to oil, a non-renewable resource, still increases.

BY AUBREY SC MAKILAN
Bulatlat

Well-known geologist Kelvin Rodolfo warns that global oil production is nearing its peak after which it will rapidly decline. He called on all governments, including the Philippines, to take heed. He said, however, that the Philippine government seems too preoccupied with dirty politics to care.

In a forum last Sept. 28 at the University of the Philippines (UP) Asian Center in Diliman, Quezon City, Rodolfo said it is not impossible to see oil prices shoot up to $300 per barrel a decade from now due to what is called “Peak Oil.”

Rodolfo is professor emeritus at the University of Illinois in Chicago and an adjunct professor at the National Institute of Geological Sciences (NIGS) at UP Diliman.

Peak Oil

The “Peak Oil” – referring to the period when world oil production reaches a peak and then rapidly declines – was predicted for the United States (U.S.) by M. King Hubbert in 1956. Hubert said oil discovery in the U.S. peaked in the 1930s while production peaked in the 1970s.

Roldofo calculated that if the peak of the discovery was between 1963 and 1964, involving about 60 billion barrels of oil with a lag time of 40 years, the peak of global production is right about now. He said oil discoveries will rapidly decline after this.

Rodolfo told Bulatlat that the oil that is hardest to extract cannot be used because extracting uses up more energy than it can yield. “There is more competition for it,” he said.

In the beginning, oil was easy to find and extract. But as it is used, the amount in storage rapidly decreases. Half of the oil that is most easily found and pumped is used up first. This accelerated use of oil has reached its limit, leading to “Peak Oil” or when half of all oil reserves is gone.

After this, it gets harder and harder to find and extract the remaining oil, said Rodolfo. And even if new fields are found, he said, the time of Peak Oil could not be delayed very long. This was affirmed in the book Hubbert’s Peak: The Impending World Oil Shortage by Kenneth Deffeyes, who wrote that “world oil production will peak in this decade – and there isn’t anything we can do to stop it.”

Consumption

In his presentation, Rodolfo also revealed that people on earth consume 80 million barrels of oil a day – the amount earth stored in nine million years.

Physics Prof. Kjell Aleklett of Uppsala University in Sweden and president of the Association for the Study of Peak Oil & Gas (ASPO), said in his article An Oil Supply Tsunami Alert that 50 years ago, the world was consuming four billion barrels of oil per year and the average discovery was around 30 billion. Today the world consumes 30 billion barrels per year and the discovery rate is approaching four billion barrels of crude oil each year.

Rodolfo said that geologists estimate that only two trillion barrels of oil had accumulated in the Earth in 600 million years before humanity started using it. This translates to an accumulation rate of only 3,333 barrels per year, making oil essentially a non-renewable resource.

The “addiction to oil,” as Rodolfo described, is much stronger in the U.S. Accordingly, Americans are the leading oil consumers.

The 3,300 barrels of oil every year can support only 146 Americans because of the U.S.’ daily consumption of 21.9 million barrels or an annual 8.004 billion barrels.

Compared to the Filipinos whose daily use of oil is 338,000 barrels or an annual of 123,370,000 barrels, the U.S.’ yearly oil accumulation can support 2,283 Filipinos. In short, one American uses what 16 Filipinos consume, equivalent to 27 barrels per American or 1.46 barrels per Filipino.

Oil wars

This “oil addiction” was also the reason behind U.S. invasion and occupation of Iraq. “The true addict will do whatever it takes to get his drugs, even kill if necessary,” Rodolfo said.

American officials knew the U.S. would suffer from the effects of tightening oil supplies. In 2001, they established an Energy Task Force, a secret body whose only publicly released documents consist largely of information on the oil-producing fields of Iraq and neighboring countries.

In an article posted at the Grinning Planet website, Richard Heinberg identified four types of war-for-oil conflicts likely to happen due to Peak Oil.

First is conflict between rich oil-consuming nations and poorer oil-producing nations, where a powerful oil-importing nation deems an oil-exporting nation to have an "unacceptable" political regime; like what happened to Iraq and what can possibly happen to Venezuela.

Second is conflict between consuming nations. Saudi Arabia’s decision to give almost all of its recent long-term oil contracts to China rather than the U.S. has bothered U.S.-based oil companies.

Third, civil wars within producing nations for control of resources will likely to occur, according to Heinberg. This is already happening in Venezuela and Nigeria, and increasingly likely to occur in Middle East countries including Iraq.

Last is the asymmetrical warfare, also referred to as “terrorism,” which may arise between rich oil-consuming nations and non-state entities in oil-producing nations.

Meanwhile, Rodolfo said that the mere idea that there could be oil in a certain area already meant conflict.

He fears that this war for oil is possible in the Spratlys group of islands in South China Sea. At present, China, Philippines, Malaysia, Taiwan and Vietnam have sent their defense forces to guard their claims in the area.

Bogus oil

Another scheme of companies and governments to suit their commercial and financial needs is manipulating reserve figures, Rodolfo said.

He pointed out that the problems with reserve estimates are the reliance on distorted estimates of reserves, pretension that production will remain constant, and, most importantly, assumption that the last oil can always be pumped just as quickly as today.

C.J. Campbell, an exploration geologist, said companies refer to what they call “proved” reserves which are much less than what the field will eventually deliver. Some call it “political barrels.”

Even the Organization of Petroleum Exporting Countries (OPEC) did unreliable reporting in the late 1980s, where huge increases were based on the so-called quota wars -- quota being partly based on reserves – while the reserves in these countries remained so constant even with high production rates.

Rodolfo scored the popular misconception that “technology and science will always be able to find more oil.” Because of this notion, some looked at oil reserves as growing which they attribute to technology. But in reality the growth was just in the reporting, he said.

In fact, according to the BP Statistical Review of World Energy of June 2004, proved oil reserves at end the of 2003 is more likely to be from 750 billion to 850 billion barrels only and not 1,148 billion barrels as previously claimed.

This blown-up figure resulted from the revised Middle East reserves of 726.6 billions of barrels, which in reality should only be more like 350 billion to 400 billion barrels.

“What happened instead is that OPEC changed its quota for how much each country could pump on the basis of what it claimed in reserves, and politicians discovered 400 billion barrels of oil without ever drilling a hole in the ground!” said David Goodstein, Caltech vice provost and professor of physics and applied physics.

The false inflation of OPEC Reserves from 1982 to 1990 involved Iraq, Kuwait, Abu Dhabi, Dubai, Iran, Venezuela, United Arab Emirates and the Kingdom of Saudi Arabia.

Heinberg said that by over-estimating their reserves, OPEC member-countries have previously been given incentive to boost their exports which was based on their level of stated reserves.

All in all, Rodolfo said, about 400 billion barrels were not really found or are considered “bogus oil.”

Meanwhile, Rodolfo said that the amount of remaining oil can be predicted from the decline of aging fields, from the diminishing returns on exploration in larger regions, extrapolating the size of new fields into the future, and matching production to earlier discovery trends.

The real score

Rodolfo said that the exploration success in the Middle East, where all the giant oil and gas fields are, has ended decades ago. He said no major exploration success has transpired since the 1960s, and that almost all production comes from the very old fields while some key fields never worked and still others water out.

While the OPEC sees the spare production capacity – how much they could ramp up production if they wanted to – to meet higher oil demand in the future, Heinberg said that it is now nearly non-existent. “They are currently producing almost flat-out from their existing wells,” he said.

In Filipino, Rodolfo said, it’s called “sagad na” (exhausted).

“We are consuming more than what we are producing. That is a bad sign,” he said. “There is no way prices are not going to go up.”

While science and technology can find oil, Rodolfo said it can also tell that there is no oil.

Extrapolating the downward oil discovery slope of the last 30 years, Aleklett said about 134 billion barrels will be found over the next 30 years. Although this “would not be a bad achievement,” he said, this still “comes short of providing sufficient new oil discoveries to meet the International Energy Agency (IEA) scenario.” The IEA projects a consumption of 1,000 billion barrels over the next 25 years.

By studying the production pattern from existing oil fields, Aleklett added that the annual decline averages from three to five percent. He explained that all oil fields which at present produce 84 million barrels per day will only produce 80.6 million barrels per day next year and 30 million barrels per day in 2030.

The IEA predicted the consumption in 2030 as 121 million barrels per day, which translates to a shortage of more then 90 million barrels per day in new production. This means, said Aleklett, "the world needs 10 new Saudi Arabias."

Of the 65 largest oil-producing countries in the world, 54 have passed their peak production, just like in East Texas, and are now experiencing the decline. Five more countries will peak in their oil production six years from now: Saudi Arabia, Iraq, Kuwait, United Arab Emirates, Kazakhstan and Bolivia.

According to Aleklett, using Hubbert’s method to compute world oil production puts the peak year for world oil between 2004 and 2008. But none of the political leaders seem to be paying attention. If the predictions are correct, there will be enormous effects on the world economy.

In the case of the Philippines, Rodolfo lamented, “Ang mga solusyon sa krisis ng Peak Oil ay naghihintay ng pansin ng pamahalaan ngayon na nakabaon sa kalokohang pamumulitika.” (The solution to the crisis of Peak Oil is now awaiting the attention of the government which is preoccupied with stupid politics.) Bulatlat

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