The Next Oil Shock? - Report

The Economics and Industry Team of New Zealand Parliamentary Library has published a new research paper: The Next Oil Shock?

The Conclusion of the report

The global economy is heavily dependent on affordable oil.

It may seem counter-intuitive that, when oil reserves and production capacityare higher than ever, the future of the oil market appears bleak. The problem is that production capacity is not expected to keep up with demand. That fact leads to severe economic consequences.

To replace the declining production from existing oil wells and increase production, oil companies are forced to extract oil in more difficult and expensive conditions (deep-water, oil sands, lignite to liquids) from smaller, less favourable reserves. The marginal (price-setting) barrel of oil costs around US$75-$85 a barrel to produce. This will continue to rise with higher demand and exhaustion of reserves.

Although there remain large reserves of oil which can be extracted, the world’s daily capacity to extract oil cannot keep increasing indefinitely. A point will be reached where it is not economically and physically feasible to replace the declining production from existing wells and add new production fast enough for total production capacity to increase. Projections from the IEA and other groups have this occurring, at least temporarily, as soon as 2012.

The difference between the global capacity to produce oil and global demand is the supply buffer. When the supply buffer is large, oil prices will be low. When the supply buffer shrinks - due to demand rising faster than production capacity or production capacity falling - prices will rise as markets add in the risk that supply will not be available to meet demand at any given point in time.

When a supply crunch forces oil prices beyond a certain point, the cost of oil forces consumers and businesses to cut other spending, inducing a recession. The recession destroys demand for oil, allowing prices to drop. Major international organisations are warning of another supply crunch as soon as 2012.

The world may be entering an era defined by relatively short periods of economic growth terminating in oil price spikes and recession.

New Zealand is not immune to the consequences of this situation. In fact, its dependency on bulk exports and tourism makes New Zealand very vulnerable to oil shocks.

The End of Oil as We Know It - 2010 ASPO-USA Conference

Global Energy Experts Agree: We are Facing the End of Oil as We Know It WASHINGTON (October 12, 2010): Economists, activists, technical experts and policymakers from across the political spectrum gathered here, October 7-9, to discuss the global energy crisis. After 150 years of oil extraction; most major oil exporting nations are well past their supply peaks, defined by scientists as “Peak Oil.” At the Association for the Study of Peak Oil and Gas’ (ASPO-USA) sixth annual conference speakers offered a single, coherent picture of a world unprepared to encounter energy limits, petroleum scarcity and the inevitable—and possibly unprecedented—rise in prices. “We are on the brink of a major energy crisis,” stated Jim Baldauf, President of ASPO-USA. “The era of low-cost, easy to get oil has come to an end. Yet, our society is heavily dependent on oil and we have no contingency plan. It is our goal every year to bring together the world’s best global energy experts to grapple with solutions to this catastrophic situation and discuss the future.”

The presentation files of the 2010 World Oil Conference have been posted on the aspo-usa web site including:

• The Impending World Energy Mess Keynote Presentation by Robert L. Hirsch
• Economy & Energy by Chris Martenson
• Energy and Financial Crisis by Nicole Foss of The Automatic Earth
• The End of Investment by John Michael Greer of The Archdruid Report
• Where are we now? by André Angelantoni of postpeakliving.com
• & more
  

Can Oil Production Meet Rising Global Demand?

On October 7, 2010, the Environmental and Energy Study Institute (EESI) held a briefing on challenges facing the oil industry to keep pace with rising global demand, and the potential implications for oil prices, national security, and the world economy. Numerous sources project demand for liquid fuels to rise to historically unprecedented levels once the global economy recovers from the recent recession. Global oil production, meanwhile, has leveled off since 2005, real oil prices have roughly doubled, and spare capacity has tightened, according to the International Energy Agency (IEA). Potential constraints on global oil production have raised concerns among industry observers, military leaders, and policymakers. This briefing examined the economic, technical, and political factors that influence the rate at which oil is extracted and processed, and how patterns of global oil production are changing.

Can Oil Production Meet Rising Global Demand?

Some Highlights from Speaker Presentations

• The challenge facing world oil production is not a problem of how much oil is in the ground (i.e. resources), but rather the rate at which oil can be economically recovered from proven reserves. That rate is constrained by a complex combination of economic, technical, geologic, and geopolitical factors.
• The International Energy Agency projects that production of conventional oil from currently developed fields will decline by 20-30 million barrels per day by 2020. Meanwhile, global demand is projected to rise from approximately 85 million barrels per day at present to nearly 100 million barrels per day by 2020.
• To date, growth in estimated world oil reserves has kept up with growth in global consumption. Most of this increase, however, has been from adjustments in the estimates of existing reserves. The rate of discovery of new oil fields has been dropping steadily since the 1960s, and is now well below the rate of global consumption.

The Crash Course: The Unsustainable Future Of Our Economy, Energy, And Environment

Chris Martenson is now dedicating his life to educating people, or giving them a "Crash Course" on the three E's: the Economy, Energy, and the Environment, so they can make better choices in the future. He wants people to understand:

• How completely dependent the 3e’s are on each other
• The unsustainable current trajectory they are on
• The changes that could have on our future (not just another housing crisis or recession, but also things like food supply shortage due to contamination, like the one we recently experienced with eggs, but on a larger scale, or the likelihood of more big natural disasters or disease outbreaks because of environmental shifts caused by global warming, etc.)
• How to recognize those changes ahead of time and prepare yourself, BEFORE it happens

Chris first introduced this Crash Course as a video series which he offers on his website for free.

Tim Jackson's economic reality check

A new TED Talk Video by Tim Jackson



As the world faces recession, climate change, inequity and more, Tim Jackson delivers a piercing challenge to established economic principles, explaining how we might stop feeding the crises and start investing in our future.

About Tim Jackson

Tim Jackson studies the links between lifestyle, societal values and the environment to question the primacy of economic growth.