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Biofuels, oil reserves and our future
Posted by: McQ on Saturday, July 05, 2008

Yeah, I know I bang this drum incessantly, but this is important stuff. We have a short time-frame in which to act in order to head off, or at least soften, the impact of future energy demand in this country. It is both an economic and national security necessity.

And it seems that everything to date which has been tried is exacerbating the problem, instead of helping it:
Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report obtained by the Guardian.

The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

The figure emphatically contradicts the US government's claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.
The Guardian goes on to claim this report was withheld in order to keep from embarrassing George Bush - how original.

The fact remains, George Bush isn't pushing governments in Europe to turn food into biofuels. Nor is George Bush the author of the mandates now in effect for ethanol (although he signed the bill with those mandates).

Meanwhile, in Madrid, a little noticed announcement:
The Arctic holds 100 billion barrels of oil in unexplored fields, a government geologist with the U.S. Geological Survey said Monday at an international oil industry gathering in Spain.

"The Arctic is almost completely unexplored," said Donald Gautier at the World Petroleum Congress in Madrid. "There are 100 billion barrels of oil to be found in the Arctic."

Gautier said that throughout the world "our best guess is still that there is a 50-50 chance that there is an excess of 500 billion barrels of conventional recoverable oil in undisclosed fields as of now."
And on June 27th, Mr. Ray Leonard, a well known oil expert, reinterated his 2001 prediction to a group to whom he was speaking:
“By 2010, the production of the fuel that has driven the world’s economy will start to rapidly decline. This will conflict with the steadily increasing demand for oil. The collision of these two trends will lead to shortages and increased prices, providing a strong incentive to shift to alternative fuel resources...Due to unequal distribution through the world of oil and gas supply and consumption, [the upcoming] transition will result in significant shifts in global power and wealth.”
Of course nothing has been done in the interim to soften that prediction. I read somewhere that the average American consumes/uses 25 barrels of oil a year as a part of their lifestyle. People in India and China average 1 to 2 barrels. That latter number is changing dramatically, as we all know. By 2010 it isn't going to be lower. Consequently, as Leonard suggests, prices will be much higher as production peaks, flattens and possibly declines.

Which country's style of living is likely to be the most heavily impacted? The one that averages 25 barrels per citizen or the ones averageing 1 to 2 barrels a year?

Leonard predicts the oil industry, as it is now structured, will hit a 90 million barrel a day "wall" at the end of the decade.

Some of his reasons:
It’s not the size of the tank but the size of the tap.” World peak oil describes the level of world oil production. The level of production is not dependent on the level of reserves in much of the world, only on the portion which operates under free market conditions, which is becoming a smaller and smaller portion of the world market.


OPEC: The limitation on production from the Arabian Gulf is mostly due to politics, lack of motivation, investment level, and type of crude, not shortages of reserves. A rapid increase in production is not physically possible at this time. However, an additional five million barrels/day of production is possible within a decade. (In his further responses, Leonard seemed to indicate that 5 million additional barrels was more “technically possible” than likely.)


FSU [Former Soviet Union] production increased from 7.5 million b/day in 1999 to 13 million b/day last year, providing 60% of world oil production growth during that period. Russian reserves were sufficient to continue growing Russian production (alone) to 14 million b/day by 2010 (117 billion barrels from the author’s study vs. 79.8 billion from BP); however, politics and tax regimes initiated during 2003 have halted growth. Russia has simply decided that they will control production growth at 10 million b/day; they may well both be able to and decide to produce close to that level for a decade.


In Rest of World (excluding tar sands), the decline rate in existing fields is estimated at 7%/year. With the exception of Brazil (ultradeep water), major producing countries are at or past peak. Rapid declines in recent years from the North Sea, Mexico and USA have been temporarily halted by additions from the deepwater Gulf of Mexico. Overall ROW production peaked in 2003; an intensive effort is needed to minimize decline rates. New production from ultradeep development has masked decline of ROW, but within the next decade, this welcome new addition will pass and the subsequent decline will accelerate.
As Leonard points out, the world is really divided into three groups of producers - OPEC (which controls 73% of the reserves and produces 43% of the world's oil), FSU [Former Soviet Union] (which controls 13.1% of the reserves and produces 16% of the world's oil) and The Rest of the World (which controls 13.7% of the reserves and produces 41% of the world's oil). His point about "The Rest of the World" (above) is critical to understanding how precarious our energy situation is.

The sentence in bold is a statment of policy which must not only be understood, but aggressively implemented if we're to survive hitting the predicted production "wall" in the near future.

Yet, as Leonard notes, we're hardly in a position to do so:
In the USA, the intensive drilling needed is unlikely to receive environmental permits on the scale needed to have significant impact on domestic production. Probably maximum US production from unconventional oil would be less than 1 million b/day.
And, as it stands right now, I'd say he's pretty much right and we're pretty much screwed. I'll say again, I'd love to see viable alternatives which could be brought on-line to replace fossil fuel, but it simply isn't there and won't be for some time. So what's the alternative? One we've eschewed for 3 decades. And that head-in-the-sand policy is now going to bite us hard in a few years. We're only seeing the beginning of that trend with $4+ gas.

Had we been pursuing the exploitation of fossil fuel all these decades, we wouldn't be faced with such a stark future.
Unconventional oil production: in-place resources of bitumen, tar sands and oil shale are roughly 10 trillion barrels or equivalent. However, having the oil in place is very different from getting the oil out in the near term. Compared to an average recovery factor of 35% for conventional, the recovery of the unconventional resources averages 10% or less. The costs—monetary, manpower and environmental—to develop these resources are considerably higher. The three largest resources are at least in the western hemisphere: USA, Canada and USA.
As for those politicians who want to lay all of this off to oil company greed, speculators and waste, the International Energy Agency says nonsense:
The IEA said that annual non-Opec growth would slow to 0.5 per cent between 2008 and 2013, against demand growth of 1.6 per cent per year. The mismatch means the world economy would be more reliant on Opec, the oil cartel, and oil prices are likely to remain at record levels, analysts said.

“Structural demand growth in developing countries and ongoing supply constraints continue to paint a tight market picture over the medium-term,” the IEA said in its Medium-Term Oil Market Report, released on Tuesday in Madrid.

Poor supply-side performance since 2004, in the face of strong demand pressures from developing countries, has forced oil prices up sharply to curb demand,” the watchdog added.
Even poorer energy policy by the government of the US exacerbated the impact of the poor "supply-side performance" well before 2004.

We have some very important decisions to make and we need to make them soon. Politicians who claim coal and oil "make us sick" need to find themselves faced with a new employment opportunities. Unless our energy policy is changed and changed quickly, we're going to be facing some radical changes in our lifestyle. And whoever is President at the time (and whichever party controls Congress at the time) is going to pay heavily at the ballot box, unless they've begun the necessary implementation of a sane energy policy for the US which will save, or at least soften, the impact of Leonard's predictions.
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Previous Comments to this Post 

The Guardian goes on to claim this report was withheld in order to keep from embarrassing George Bush
HAHAHAHAHAHAHAHAHAHAHAHAHAHA.......................oh, that’s rich.

Climate Change forces are stooping to desperate measures here
Written By: shark
URL: http://
I’d love to see viable alternatives which could be brought on-line to replace fossil fuel
How about burning the environmentalists for placing us in this position?
[/angry snark]
Written By: Bithead
Ok I’ve had just about enough of this....
1) Until alternative fuels can produce the same or GREATER energy per dollar, we will not have alternative energy...ethanol, bio-diesel, alternium, substitute-aline, whatever, until any of these can give me "x" amount of energy per dollar, where "x" equals or is greater than a dollar’s worth of gasoline, this is pointless. To focus on alternative fuels is to make us poorer per unit of energy developed....
2) For a libertarian website, the appalling lack of fundamental economic knowledge is sad...this is from a POLI SCI major! So we in the RoW are going to see a tremendous transfer of power from US to the fuel producers, really? Did this tremendous transfer of power occur in the 1970’s? It was forecast then, too. Did the various primary commodity producing cartels, OPEC, Coffee, bananas, a number of minerals-yes all these emerged in response to OPEC’s "power"-take control of the world? No.

Why not? Well simply the RoW adds value to the primary commodities, making them inherently RICHER than the commodity producers...who has the nicer car, the farmer that grows the wheat, the miller, OR the Bakery CEO? And if the wheat farmer thinks, "Ah-Hah, I produce the wheat the bakery CEO needs, I have HIM over the barrel" who usually wins that fight? Right the bakery CEO and s/he keeps his/her Mercedes.

The RoW has the factories that make things the fuel producers want...meaning that the Fuel Producers are paying for their OWN high fuel prices AND the value-added from the factory. Sure Hugo and Achmedinajad are getting lotsa of cash per barrel, but then they need to put that money to use...and they don’t make Mercedes, or Sukhoi’s or Type-207 U-boats, or consumer electronics, they have to purchase those from the supposedly powerless or relatively less powerful RoW...

Look at the US economy, who makes the most per dollar invested, the adders of value or the suppliers of the primary commodities, the coal, the iron ore, the wheat, or the whatever, or the people who combine those commodities into a variety of consumer goods? There is NO transfer of power from the factory to the farm...both get richer, thru time but the factory always has the advantage over the farm.

Bottom-line: we’ve been hear and heard all this before, it didn’t happen in the 1970’s and it isn’t going to happen today, primary commodity producers do NOT have the capacity to fundamentally shift market realities.
Written By: Joe
URL: http://
Why does the rest of the world hate us?

Economic growth is the goal of almost all countries and peoples of the world because it results in better living conditions for all: better nutrition, less disease/illness, longer lives, cleaner environment, etc. Economic growth, world wide, depends on many factors and one of the most important is a supply of energy – in the form of natural resources and the various products created by employing those resources, like electricity or gasoline. The globalization of markets and trade means that individual needs (governments, companies, and peoples) for energy compete across the globe with every other need for that energy.

Price is the method by which free markets determine the best use for any good – energy included. We have recently seen a dramatic increase in the price of all energy forms around the world. There are many ideas about the cause for this rise – some serious, some bordering on idiotic – but almost all agree that there is a real imbalance between the available supply of energy and the world-wide demand for it because demand has risen much faster than available supplies. The price mechanism provides the clearest way to measure and highlight this fact.

Two obvious ways to resolve this imbalance present themselves: reduce demand or increase supply. Here the arguments overlap the economic and the political, producing significant amounts of rhetoric and little in the way of practical solutions. Full disclosure: I am firmly on the “increase supply” side. I embrace increased efficiency. I fully support practical “alternative energy” development, more R&D, market transparency and less government dictates. But I believe it all comes down to supply.

Today, there is a country that has vast amounts of known and suspected supplies of energy resources that refuses to make these resources available to the world market. That country has vast quantities of coal, oil and natural gas that would have a significant impact on world-wide supply. That country is us: the United States.

Why do we withhold these supplies from the rest of the world? Who among us believes that we have no obligation to the greater global population to use these resources to bring world-wide supply and demand into better balance? It is the very same people who bemoan our supposed lack of respect for and in the rest of the world; our unilateralism. Those who say we need to pay more attention to views of other countries, the plight of less-well-off peoples around the world, the opinions of people everywhere, and, especially, those who cry out for our own energy independence.

These anti-anythings use lofty rhetoric about pristine places, poor and helpless wild creatures, stewards of the planet, global climate change, etc. But, let’s be clear about their reality. Oil drilling is icky, really icky. Who wants to look at those drilling rigs? Even if they are in places we’ll never see – we still know they are there. We still know they are ugly. Oil wells are also icky even if we can’t actually see them. Refineries? - forget it. In addition to being icky, they remind us of our dependence on things like oil and chemicals that certain groups of our population would prefer to ignore.

No better example of the lofty rhetoric versus reality mindset was provided by the sensitive and caring folks who couldn’t stand the idea that some windmills might be visible from the front porch of their Cape Cod or Martha’s Vineyard summer homes. Even if they couldn’t see them, just knowing those pesky windmills were out there would disturb their summer quiet-time.

These people continue to demand that other countries produce the energy we and the rest of the world need for continued economic growth. Other people should have to put up with those icky drilling rigs and wells and refineries that our caring-and-sensitive class can’t bear the thought of.

I wonder if these people might consider that some of the world may not like us exactly because of their policies, their obstruction of progress for us and the rest of the world. Could it be that people around the world see a self-righteous, selfish and privileged class seeking to keep the rest of the world from the benefits of progress that those very same people enjoy? And, if so, how will they twist their rhetoric to be able to continue their state of denial?

Written By: The Infonatic
URL: http://
As American citizens hear nothing but doom and gloom about energy and see over $4.00 per gallon at the pump, there are signs that with new technology old oil and gas fields are being recognized as offering an immediate energy bridge until offshore fields are ready to produce and we have developed alternative fuels to the point where petroleum and natural gas is reserved for fertilizer production and other basic needs.

The major media and political leadership continue to ignore the new oil rush in the 50 year old oil field in the Williston Basin of eastern Montana, western North Dakota and Saskatchewan. Recently local newspapers in Pennsylvania have been reporting on a land rush there. for mineral rights since the same technology that has reopened the Bakken Formation oil field in the Williston Basin, has reopened the Marcellus Shale Formation to exploration for natural gas.

The Marcellus Shale Formation runs from New York into West Virginia along the Appalachian Mountains. This old oil and gas field may contain more than 500 trillion cubic feet of natural gas. The same new techniques are also being used to recover gas in the previously thought to be exhausted Barnett Shale Formation in Texas; horizontal drilling and pressure cracking of the rock formation to collect the gas.

All is not lost if the political will to move forward is somehow found by our special interest controlled politicians.

Written By: AMR
URL: http://
Something else that needs to be factored into future oil supply is the failure on the part of both Venezuela & Iran to maintain their oil production facilities.

Since the nationalization of the Venezuelan oil industry many experienced and educated employees have been replaced by political insiders. The same thing has happened in Iran. The latest estimates I’ve read (sorry, can’t find the links) are 7 - 10 years before production in those countries start failing due to their failure to maintain their oil infrastructure.
Written By: ElvenPhoenix
URL: http://
Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report obtained by the Guardian.

The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.

The figure emphatically contradicts the US government’s claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.
Am I going to take the word of a organization similar in composition and track record of corruption as the UN over the word of the US government as gospel?

There’s too much disparity for one or the other not to be ’fudging’ in a spectacular way. I have no reason to trust the WB numbers as closer to the truth than the US.
Written By: jpm100
URL: http://

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