Friday, April 28, 2006

No. 159 - July 2005
by Richard Heinberg

Threats of Peak Oil to the Global Food Supply
A paper presented at the FEASTA Conference, "What Will We Eat as the Oil Runs Out?", June 23-25, 2005, Dublin Ireland

Food is energy. And it takes energy to get food. These two facts, taken together, have always established the biological limits to the human population and always will.

The same is true for every other species: food must yield more energy to the eater than is needed in order to acquire the food. Woe to the fox who expends more energy chasing rabbits than he can get from eating the rabbits he catches. If this energy balance remains negative for too long, death results; for an entire species, the outcome is a die-off event, perhaps leading even to extinction.

Humans have become champions at developing new strategies for increasing the amount of energy - and food - they capture from the environment. The harnessing of fire, the domestication of plants and animals, the adoption of ards and plows, the deployment of irrigation networks, and the harnessing of traction animals - developments that occurred over tens of thousands of years - all served this end.

The process was gradual and time-consuming. Not only were new tools developed, but, over centuries, small inventions and tiny modifications of existing tools - from scythes to horse-collars - enabled human and animal muscle power to be leveraged more effectively.

This entire exercise took place within a framework of natural limits. The yearly input of solar radiation to the planet was always immense relative to human needs (and still is), but it was finite nevertheless, and while humans directly appropriated only a tiny proportion of this abundance the vast majority of that radiation served functions that indirectly supported human existence - giving rise to air currents by warming the surface of the planet, and maintaining the lives of countless other kinds of creatures in the oceans and on land.

The amount of available human muscle power was limited by the number of humans, who, of course, had to be fed. Draft animals (bred for their muscle-power) also entailed energy costs, as they likewise needed to eat but also had to be cared for in various ways. Therefore, even with clever refinements in tools and techniques, in crops development and animal breeding, it was inevitable that humans would reach a point of diminishing returns in their ability to continue increasing their energy harvest, and therefore the size of their population.

By the nineteenth century these limits were beginning to become apparent. Famine and hunger had long been common throughout even the wealthiest regions of the planet. But, for Europeans, the migration of surplus populations to other nations, crop rotation, and the application of manures and composts were gradually making those events less frequent and severe. European farmers, realizing the need for a new nitrogen source in order to continue feeding burgeoning and increasingly urbanized populations, began employing guano imported from islands off the coasts of Chile and Peru. The results were gratifying. However, after only a few decades, these guano deposits were being depleted. By this time, in the late 1890s, the world's population was nearly twice what it had been at the beginning of the century. A crisis was again in view.

But again crisis was narrowly averted, this time due to fossil fuels. In 1909, two German chemists named Fritz Haber and Carl Bosch invented a process to synthesize ammonia from atmospheric nitrogen and the hydrogen in fossil fuels. The process initially used coal as a feedstock, though later it was adapted to use natural gas. After the end of the Great War, nation after nation began building Haber-Bosch plants; today the process produces 150 million tons of ammonia-based fertilizer per year, equaling the total amount of available nitrogen introduced annually by all natural sources combined.

Fossil fuels went on to offer still other ways of extending natural limits to the human carrying capacity of the planet.

Early steam-driven tractors came into limited use in 19th century; but, after World War I, the size and effectiveness of powered farm machinery expanded dramatically, and the scale of use exploded, especially in North America, Europe, and Australia from the 1920s through the '50s. In the 1890s, roughly one quarter of US cropland had to be set aside for the growing of grain to feed horses - most of which worked on farms. The internal combustion engine provided a new kind of horsepower not dependent on horses at all, and thereby increased the amount of arable land available to feed humans.

Chemists developed synthetic pesticides and herbicides in increasing varieties after WWII, using knowledge pioneered in laboratories that had worked to perfect explosives and other chemical warfare agents. Pesticides not only increased crop yields in North America, Europe, and Australia, but also reduced the prevalence of insect-borne diseases like malaria. The world began to enjoy the benefits of "better living through chemistry," though the environmental costs, in terms of water and soil pollution and damage to vulnerable species, would only later become widely apparent.

In the 1960s, industrial-chemical agricultural practices began to be exported to what by that time was being called the Third World: this was glowingly dubbed the Green Revolution, and it enabled a tripling of food production during the ensuing half-century.

At the same time, the scale and speed of distribution of food increased. This also constituted a means of increasing carrying capacity, though in a more subtle way.

The trading of food goes back to Paleolithic times; but, with advances in transport, the quantities and distances involved gradually increased. Here again, fossil fuels were responsible for a dramatic discontinuity in the previously slow pace of growth. First by rail and steamship, then by truck and airplane, immense amounts of grain and ever-larger quantities of meat, vegetables, and specialty foods began to flow from countryside to city, from region to region, and from continent to continent.

William Catton, in his classic book Overshoot, terms the trade of essential life-support commodities "scope expansion."1 Carrying capacity is always limited by whatever necessity is in least supply, as Justus von Liebig realized nearly a century-and-a-half ago. If one region can grow food but has no exploitable metal deposits, its carrying capacity is limited by the lack of metals for the production of farm tools. Another region may have metals but insufficient topsoil or rain; there, carrying capacity is limited by the lack of food. If a way can be found to make up for local scarcity by taking advantage of distant abundance (as by exporting metal ores or finished tools from region A to help with food production in region B, and then exporting food from B to A), the total carrying capacity of the two regions combined can be increased substantially. We can put this into a crude formula:

CC of A+B > (CC of A) + (CC of B)

From an ecological as well as an economic point of view, this is why people trade. But trade has historically been limited by the amount of energy that could be applied to the transport of materials. Fossil fuels temporarily but enormously expanded that limit.

The end result of chemical fertilizers, plus powered farm machinery, plus increased scope of transportation and trade, was not just a three-fold leap in crop yields, but a similar explosion of human population, which has grown five-fold since dawn of industrial revolution.

Agriculture at a Crossroads

All of this would be well and good if it were sustainable, but, if it proves not to be, then a temporary exuberance of the human species will have been purchased by an eventual, unprecedented human die-off. So how long can the present regime be sustained? Let us briefly survey some of the current trends in global food production and how they are related to the increased use of inexpensive fossil fuels.

Arable cropland: For millennia, the total amount of arable cropland gradually increased due to the clearing of forests and brush, and the irrigation of land that would otherwise be too arid for cultivation. That amount reached a maximum within the past two decades and is now decreasing because of the salinization of irrigated soils and the relentless growth of cities, with their buildings, roads, and parking lots. Irrigation has become more widespread because of the availability of cheap energy to operate pumps, while urbanization is largely a result of cheap fuel-fed transportation and the flushing of the peasantry from the countryside as a consequence of their inability to buy or to compete with fuel-fed agricultural machinery. Roads that cover former cropland are built from oil, and the erection of buildings has been facilitated by the mechanization of construction processes and the easy transport of materials.

Topsoil: The world's existing soils were generated over thousands and millions of years at a rate averaging an inch per 500 years. The amount of soil available to farmers is now decreasing at an alarming rate, due mostly to wind and water erosion. In the US Great Plains, roughly half the quantity in place at the beginning of the last century is now gone. In Australia, after two centuries of European land-use, more than 70 percent of land has become seriously degraded.2 Erosion is largely a function of tillage, which fractures and loosens soil; thus, as the introduction of fuel-fed tractors has increased the ease of tillage, the rate of soil loss has increased dramatically.

The number of farmers as a percentage of the population: In the US at the turn of the last century, 70 percent of the population lived in rural areas and farmed. Today less than two percent of Americans farm for a living. This change came primarily because fuel-fed farm machinery replaced labor, which meant that fewer farmers were needed. Hundreds of thousands - perhaps millions - of families that desperately wanted to farm could not continue to do so because they could not afford the new machines, or could not compete with their neighbors who had them. Another way of saying this is that economies of scale (driven by mechanization) gave an advantage to ever-larger farms. But the loss of farmers also meant a gradual loss of knowledge of how to farm and a loss of rural farming culture. Many farmers today merely follow the directions on bags of fertilizer or pesticide, and live so far from their neighbors that their children have no desire to continue the agricultural way of life.

The genetic diversity of domesticated crop varieties: This is decreasing dramatically due to the consolidation of the seed industry. Farmers on the island of Bali in Indonesia once planted 200 varieties of rice, each adapted to a different microclimate; now only four varieties are grown. In 2000, Semenis, the world's largest vegetable seed corporation, eliminated 25 percent of its product line as a cost-cutting measure. This ongoing, massive genetic consolidation is also being driven by the centralization of the seed industry (the largest three field seed companies - DuPont, Monsanto, and Novartis - now account for 20 percent of the global seed trade), which is in turn consequent upon fuel-fed globalization.

Grain production per capita: A total of 2,029 million tons of grain were produced globally in 2004; this was a record in absolute numbers. But for the past two decades population has grown faster than grain production, so there is actually less available on a per-head basis. In addition, grain stocks are being drawn down: According to Lester Brown of the Earth Policy Institute, "in each of the last four . . . years production fell short of consumption. The shortfalls of nearly 100 million tons in 2002 and again in 2003 were the largest on record."3 This trend suggests that the strategy of boosting food production by the use of fossil fuels is already yielding diminishing returns.

Global climate: This is being increasingly destabilized as a result of the famous greenhouse effect, resulting in problems for farmers that are relatively minor now but that are likely to grow to catastrophic proportions within the next decade or two. Global warming is now almost universally acknowledged as resulting from CO2 emissions from the burning of fossil fuels.

Available fresh water: In the US, 85 percent of fresh water use goes toward agricultural production, requiring the drawing down of ancient aquifers at far above their recharge rates. Globally, as water tables fall, ever more powerful pumps must be used to lift irrigation water, requiring ever more energy usage. By 2020, according to the Worldwatch Institute and the UN, virtually every country will face shortages of fresh water.

The effectiveness of pesticides and herbicides: In the US, over the past two decades pesticide use has increased 33-fold, yet, each year a greater amount of crops is lost to pests, which are evolving immunities faster than chemists can invent new poisons. Like falling grain production per capita, this trend suggests a declining return from injecting the process of agricultural production with still more fossil fuels.

Now, let us add to this picture the imminent peak in world oil production. This will make machinery more expensive to operate, fertilizers more expensive to produce, and transportation more expensive. While the adoption of fossil fuels created a range of problems for global food production, as we have just seen, the decline in the availability of cheap oil will not immediately solve those problems; in fact, over the short term they will exacerbate them, bringing simmering crises to a boil.

That is because the scale of our dependency on fossil fuels has grown to enormous proportions.

In the US, agriculture is directly responsible for well over 10 percent of all national energy consumption. Over 400 gallons of oil equivalent are expended to feed each American each year. About a third of that amount goes toward fertilizer production, 20 percent to operate machinery, 16 percent for transportation, 13 percent for irrigation, 8 percent for livestock raising, (not including the feed), and 5 percent for pesticide production. This does not include energy costs for packaging, refrigeration, transportation to retailers, or cooking.

Trucks move most of the world's food, even though trucking is ten times more energy-intensive than moving food by train or barge. Refrigerated jets move a small but growing proportion of food, almost entirely to wealthy industrial nations, at 60 times the energy cost of sea transport.

Processed foods make up three-quarters of global food sales by price (though not by quantity). This adds dramatically to energy costs: for example, a one-pound box of breakfast cereal may require over 7,000 kilocalories of energy for processing, while the cereal itself provides only 1,100 kilocalories of food energy.

Over all - including energy costs for farm machinery, transportation, and processing, and oil and natural gas used as feedstocks for agricultural chemicals - the modern food system consumes roughly ten calories of fossil fuel energy for every calorie of food energy produced.4

But the single most telling gauge of our dependency is the size of the global population. Without fossil fuels, the stupendous growth in human numbers that has occurred over the past century would have been impossible. Can we continue to support so many people as the availability of cheap oil declines?

Feeding a Growing Multitude

The problems associated with the modern global food system are widely apparent, there is widespread concern over the sustainability of the enterprise, and there is growing debate over the question of how to avoid an agricultural Armageddon. Within this debate two viewpoints have clearly emerged.

The first advises further intensification of industrial food production, primarily via the genetic engineering of new crop and animal varieties. The second advocates ecological agriculture in its various forms - including organic, biodynamic, Permaculture, and Biointensive methods.

Critics of the latter contend that traditional, chemical-free forms of agriculture are incapable of feeding the burgeoning human population. Here is a passage by John John Emsley of University of Cambridge, from his review of Vaclav Smil's Enriching the Earth: Fritz Haber, Carl Bosch, and the Transformation of World Food:

If crops are rotated and the soil is fertilized with compost, animal manure and sewage, thereby returning as much fixed nitrogen as possible to the soil, it is just possible for a hectare of land to feed 10 people - provided they accept a mainly vegetarian diet. Although such farming is almost sustainable, it falls short of the productivity of land that is fertilized with "artificial" nitrogen; this can easily support 40 people, and on a varied diet.5

This seems unarguable on its face. However, given the fact that fossil fuels are non-renewable, it will be increasingly difficult to continue to supply chemical fertilizers in present quantities. Nitrogen can be synthesized using hydrogen produced from the electrolysis of water, with solar or wind power as a source of electricity. But currently no ammonia is being commercially produced this way because of the uncompetitive cost of doing so. To introduce and scale up the process will require many years and considerable investment capital.

The bioengineering of crop and animal varieties does little or nothing to solve this problem. One can fantasize about modifying maize or rice to fix nitrogen in the way that legumes do, but so far efforts in that direction have failed. Meanwhile, the genetic engineering of complex life forms on a commercial scale appears to pose unprecedented environmental hazards, as has been amply documented by Dr. Mae Wan-Ho among many others.6 And the bio-engineering industry itself consumes fossil fuels, and assumes the continued availability of oil for tractors, transportation, chemicals production, and so on.

Those arguing in favor of small-scale, ecological agriculture tend to be optimistic about its ability to support large populations. For example, the 2002 Greenpeace report, "The Real Green Revolution: Organic and Agroecological Farming in the South," while acknowledging the lack of comparative research on the subject, nevertheless notes:

In general . . . it is thought that [organic and agroecological farming] can bring significant increases in yields in comparison to conventional farming practices. Compared to "Green Revolution'"farming systems, OAA is thought to be neutral in terms of yields, although it brings other benefits, such as reducing the need for external inputs.7

Eco-agricultural advocates often contend that there is plenty of food in the world; existing instances of hunger are due to bad policy and poor distribution. With better policy and distribution, all could easily be fed. Thus, given the universally admitted harmful environmental consequences of conventional chemical farming, the choice should be simple.

Some eco-ag proponents are even more sanguine, and suggest that their methods can produce far higher yields than can mechanized, chemical-based agriculture. Experiments have indeed shown that small-scale, biodiverse gardening or farming can be considerably more productive on a per-hectare basis than monocropped megafarms.8 However, some of these studies have ignored the energy and land-productivity costs of manures and composts imported onto the study plots. In any case, and there is no controversy on this point, Permaculture and Biointensive forms of horticulture are dramatically more labor- and knowledge-intensive than industrial agriculture. Thus the adoption of these methods will require an economic transformation of societies.

Therefore even if the nitrogen problem can be solved in principle by agro-ecological methods and/or hydrogen production from renewable energy sources, there may be a carrying-capacity bottleneck ahead in any case, simply because of the inability of societies to adapt to these very different energy and economic needs quickly enough, and also because of the burgeoning problems mentioned above (loss of fresh water resources, unstable climate, etc.). According to widely-accepted calculations, humans are presently appropriating at least 40 percent of Earth's primary biological productivity.9 It seems unlikely that we, a single species after all, can do much more than that. Even though it may not be politically correct in many circles to discuss the population problem, we must recognize that we are nearing or past fundamental natural limits, no matter which course we pursue.

Given the fact that fossil fuels are limited in quantity and we are already in view of the global oil production peak, the debate over the potential productivity of chemical-gene engineered agriculture versus that of organic and agroecological farming may be relatively pointless. We must turn to a food system that is less fuel-reliant, even if it does prove to be less productive.

The Example of Cuba

How we might do that is suggested by perhaps the best recent historical example of a society experiencing a fossil-fuel famine. In the late 1980s, farmers in Cuba were highly reliant on cheap fuels and petrochemicals imported from the Soviet Union, using more agrochemicals per acre than their American counterparts. In 1990, as the Soviet empire collapsed, Cuba lost those imports and faced an agricultural crisis. The population lost 20 pounds on average and malnutrition was nearly universal, especially among young children. The Cuban GDP fell by 85 percent and inhabitants of the island nation experienced a substantial decline in their material standard of living.

Cuban authorities responded by breaking up large state-owned farms, offering land to farming families, and encouraging the formation of small agricultural co-ops. Cuban farmers began employing oxen as a replacement for the tractors they could no longer afford to fuel. Cuban scientists began investigating biological methods of pest control and soil fertility enhancement. The government sponsored widespread education in organic food production, and the Cuban people adopted a mostly vegetarian diet out of necessity. Salaries for agricultural workers were raised, in many cases to above the levels of urban office workers. Urban gardens were encouraged in parking lots and on public lands, and thousands of rooftop gardens appeared. Small food animals such as chickens and rabbits began to be raised on rooftops as well.

As a result of these efforts, Cuba was able to avoid what might otherwise have been a severe famine. Today the nation is changing from an industrial to an agrarian society. While energy use in Cuba is now one-twentieth of that in the US, the economy is growing at a slow but steady rate. Food production has returned to 90 percent of its pre-crisis levels.10

The Way Ahead

The transition to a non-fossil-fuel food system will take time. And it must be emphasized that we are discussing a systemic transformation - we cannot just remove oil in the forms of agrochemicals from the current food system and assume that it will go on more or less as it is. Every aspect of the process by which we feed ourselves must be redesigned. And, given the likelihood that global oil peak will occur soon, this transition must occur at a rapid pace, backed by the full resources of national governments.

Without cheap transportation fuels we will have to reduce the amount of food transportation that occurs, and make necessary transportation more efficient. This implies increased local food self-sufficiency. It also implies problems for large cities that have been built in arid regions capable of supporting only small populations on their regional resource base. One has only to contemplate the local productivity of a place like Nevada, to appreciate the enormous challenge of continuing to feed people in such a city such as Las Vegas without easy transportation.

We will need to grow more food in and around cities. Currently, Oakland California is debating a food policy initiative that would mandate by 2015 the growing within a fifty-mile radius of city center of 40 percent of the vegetables consumed in the city.11 If the example of Cuba were followed, rooftop gardens would result, as well as rooftop raising of food animals like chickens, rabbits and guinea pigs.

Localization of the food process means moving producers and consumers of food closer together, but it also means relying on the local manufacture and regeneration of all of the elements of the production process - from seeds to tools and machinery. This would appear to rule out agricultural bioengineering, which favors the centralized production of patented seed varieties, and discourages the free saving of seeds from year to year by farmers.

Clearly, we must minimize chemical inputs to agriculture (direct and indirect - such as those introduced in packaging and processing).

We will need to re-introduce draft animals in agricultural production. Oxen may be preferable to horses in many instances, because the former can eat straw and stubble, while the latter would compete with humans for grains.

Governments must also provide incentives for people to return to an agricultural life. It would be a mistake simply to think of this simply in terms of the need for a larger agricultural work force. Successful traditional agriculture requires social networks, and intergenerational sharing of skills and knowledge. We need not just more agricultural workers, but a rural culture that makes agricultural work rewarding.

Farming requires knowledge and experience, and so we will need education for a new generation of farmers; but only some of this education can be generic - much of it must of necessity be locally appropriate.

It will be necessary as well to break up the corporate mega-farms that produce so much of today's cheap grain. Industrial agriculture implies an economy of scale that will be utterly inappropriate and unworkable for post-industrial food systems. Thus land reform will be required in order to enable smallholders and farming co-ops to work their own plots.

In order for all of this to happen, governments must end subsidies to industrial agriculture and begin subsidizing post-industrial agricultural efforts. There are many ways in which this could be done. The present regime of subsidies is so harmful that merely stopping it in its tracks might in itself be advantageous; but, given the fact that a rapid transition is essential, offering subsidies for education, no-interest loans for land purchase, and technical support during the transition from chemical to organic production would be essential.

Finally, given carrying-capacity limits, food policy must include population policy. We must encourage smaller families by means of economic incentives and improve the economic and educational status of women in poorer countries.

All of this constitutes a gargantuan task, but the alternatives - doing nothing or attempting to solve our food-production problems simply by applying more technological intensification - will almost certainly result in dire consequences. In that case, existing farmers would fail because of fuel and chemical prices. All of the worrisome existing trends mentioned earlier would intensify to the point that the human carrying capacity of Earth would be degraded significantly, and perhaps to a large degree permanently.

In sum, the transition to a fossil-fuel-free food system does not constitute a utopian proposal. It is an immense challenge and will call for unprecedented levels of creativity at all levels of society. But in the end it is the only rational option for averting human calamity on a scale never before seen.
I Smell Gas
A subject that makes congressmen stupid.
By Jacob Weisberg
Posted Wednesday, April 26, 2006, at 3:51 PM ET

Few topics seem to addle the collective brain of Washington like high gas prices. Politicians who raise this issue can generally be assumed to be partisan, cynical, demagogic, and dishonest. But one must not discount the possibility that something about the subject actually makes them stupid.

With gasoline prices now spiking around $3 a gallon—near their inflation-adjusted 1981 peak—we are witnessing stupidity on wheels. Republicans, who as incumbents fear that they will be blamed, are in a kind of frenzy to abandon free-market principles, basic economic reasoning, and increasingly, reason itself. Their week began with Senate Majority Leader Bill Frist and House Speaker Dennis Hastert calling upon the Bush administration to investigate possible price-gouging and market manipulation. The Republican leaders went so far as to recommend "sweeps" of gas stations to confirm that price increases reflect "changes in market conditions" and are not merely attempts by businesses to earn money. The next day, President Bush joined in calling on the Bush administration to launch an investigation. As it happens, a Federal Trade Commission investigation into possible market manipulation is already under way from last year, when Bush and Congress asked for one following a post-Hurricane Katrina gas-price rise. While he was at it, Bush also asked Congress to repeal the tax breaks they joined together to give to the oil companies last year.

Republican talk about price-gouging is inane at several levels. If you don't have some sort of monopoly power, gouging is another word for charging the highest price the market will bear, also known as capitalism. This is why the FTC investigation has turned up nothing. What constrains filling stations from marking up gas excessively is not the fear of prosecution but competition from other filling stations. Even many Republican congressmen understand this, but calling for an investigation is a good way to deflect attention from the party's favoritism toward corporations that are now so profitable that they have become unpopular. Of course, there is outrageous anti-competitive conduct in the petroleum industry—it's called OPEC. But no presidential administration, especially the current one, takes seriously the idea that this price-fixing cartel is a criminal conspiracy under American law. Republicans would sooner propose a windfall-profits tax—an anti-market notion if ever there was one—as Sen. Arlen Specter recently did.

Democrats, who can barely restrain their glee at this political opportunity, bandy the same implausible complaints about gouging and "speculation" and speak even more enthusiastically about confiscating oil-company profits. They also have their own distinctive form of gas-price stupidity, which is to ignore the conflict between the environmentalism they espouse and the cheap fuel they demand. House Minority Leader Nancy Pelosi even moaned about high gas prices in her Earth Day statement last week. If you care, as Pelosi claims to, about clean air and preserving the coastline, you should welcome high gas prices. Even Al Gore, who once called cars "a mortal threat to the security of every nation," decried high gas prices when he ran for president in 2000. Democrats like to argue that gas prices are high because Bush has done too little to develop alternative energy sources and reduce dependence on imported oil. But it is high oil prices, far more than ethanol subsidies or incentives to buy hybrids cars, that will drive the development of new fuels.

And then there are the gas-related idiocies that afflict both sides. Bob Menendez, a Democratic senator from New Jersey, has already raised the perennial Republican notion of "suspending" the 18-cent-per-gallon federal gas tax, an idea that is bad for too many reasons to enumerate in a single day. A number of Republicans are now repeating the Democratic shibboleth that overpaid oil-company executives, rather than supply and demand, are somehow to blame. Whichever party is out of office tries to assert that the party in office has the power to reduce gas prices but simply chooses not to do so. Everything Democrats are now saying about Bush echoes what Republicans said about Bill Clinton when gas prices spiked in 2000. When you're out of power, you attack the president for not using the Strategic Petroleum Reserve, or, if he gives in to your demands, you denounce him for misusing it. "The strategic reserve is meant for times of war or a major disruption in oil supplies," Bush told an audience in October 2000, when he was criticizing Al Gore for (hypocritically) proposing to do the same thing Bush has just ordered done. If you are a Democrat, you get the option of either attacking the president for not leaning on his Saudi buddies to turn on the oil spigot, or accusing him of manipulating the Saudi oil supply for political gain in advance of an election.

What none can acknowledge is that higher gas prices in the United States are a good thing. To be sure, oil at $70 a barrel causes hardships for working people and delights some of the world's worst dictators. But cheap gasoline imposes its own costs on society: greenhouse gas emissions, air pollution and its attendant health risks, traffic congestion, and accidents. The ideal way to cope with these externalities would be with higher gas taxes or a carbon tax. But these are politically impossible ideas at the moment—Democrats lost control of Congress in part because they passed a 4-cent-per-gallon tax increase in 1993. The next best solution is the one that has arrived on its own: a high market price for oil, which spurs conservation and substitution. Sustained high prices will bring about behavioral and political changes: energy conservation, public transportation, less exurban sprawl, and eventually the economic viability of alternative fuel sources such as biomass, fuel cells, wind, and solar power, which may one day undermine the power of the oil oligarchs. Are politicians too stupid to understand this, or just smart enough not to say it aloud?

Thursday, April 20, 2006

Saudi Aramco boosts drilling efforts to offset declining fields Dubai (Platts)--11Apr2006
Saudi Aramco's mature crude oil fields are expected to decline at a gross
average rate of 8%/year without additional maintenance and drilling, a Saudi
Aramco spokesman said Tuesday.
But Saudi Aramco has taken a number of measures to offset a decline in
output from the country's aging oil fields, the spokesman added.
"A variety of remedial activities are always being taken in oil fields
influencing their effective decline rates," the spokesman said. "The drilling
of additional development wells in the producing fields is Saudi Aramco's
standard practice to offset normal declines of older wells."
This is particularly important when oil fields are progressively depleted
under a well thought out strategy of maximizing the sweep and displacement
efficiencies, leading to high ultimate oil recovery, the spokesman said.
"This maintain potential drilling in mature fields combined with a
multitude of remedial actions and the development of new fields, with long
plateau lives, lowers the composite decline rate of producing fields to around
2%," the spokesman said.
Underscoring these efforts, Saudi Aramco signed two contracts with J. Ray
McDermott Middle East and McDermott Arabia Company Ltd, subsidiaries of J. Ray
McDermott, to detail design, procure, fabricate, transport and install
offshore facilities for the Maintain Potential and Khursaniyah Upstream
Pipeline programs, Saudi Aramco said April 6.
The first contract includes two drilling support structures in Zuluf
field to be installed in December 2006 and one new wellhead production
platform in the Central Safaniya oil field to support onstream start-up in May
2007, Saudi Aramco said.
Three additional wellhead platforms will be installed in the Central
Safaniya and Zuluf fields by December 2007. New associated flowlines will
connect these platforms to existing offshore tie-in (manifold) platforms.
To support increasing production in the Central Safaniya field, a new
tie-in platform (Safaniya TP-18) will also be engineered, procured, fabricated
and installed by December 2007, along with a 24-inch trunkline between it and
a subsea connection on the new 42-inch trunkline flowing to the onshore
Safaniya GOSP-1, installed under a separate contract.
The second contract is associated with the subsea portion, some 22 km (14
miles) long, of the 30-inch gas pipeline from Abu Ali Island to an onshore
site at Khursaniyah to be installed by May 2007.
This subsea portion is part of the new 66 km BKTG-1 pipeline that will
transport 220 million cubic feet/day of gas from Abu Ali Plant to Khursaniyah
Gas Plant.
--Glen Carey,

For more news, request a free trial to Platts Oilgram News at Saudi Aramco boosts drilling efforts to offset declining fields

Tuesday, April 11, 2006

Published on 4 Apr 2006 by GraphOilogy. Archived on 4 Apr 2006.

Open letter to Texas newspapers about peak oil: 'Why aren’t you listening?'
by Jeffrey J. Brown

April 2, 2006

Mr. Wesley R. Turner, President & Publisher
Fort Worth Star Telegram

Mr. James H. Moroney , III, Publisher & CEO
The Dallas Morning News

Subject: What Are Two Texas Billionaires,
Richard Rainwater & T. Boone Pickens,
Saying About Peak Oil & Why Aren’t You Listening?


I realize that I don’t have to introduce Richard Rainwater and Boone Pickens to you two gentlemen, but for the benefit of those who may not be familiar with Messrs. Rainwater and Pickens, following are brief introductions.

Richard Rainwater is the Texas based businessman who was chiefly responsible for turning the Bass Family’s inheritance of $50 into a $5 billion dollar fortune. Mr. Rainwater was therefore indirectly responsible for the remarkable urban renaissance of downtown Fort Worth, as a result of the Bass family’s massive investments. Mr. Rainwater also had a material role in George W. Bush’s selection as Managing Partner of the Texas Rangers Baseball Team, which launched Mr. Bush on his way to the Governor’s Mansion and then to the White House.

Mr. Pickens, now based in Dallas, has had a long and storied career in the oil and gas industry. Like most Texas oilmen, Mr. Pickens has had his ups and downs. Most recently he has been on an up cycle, via his investment firm, BP Capital.

These two gentlemen share an uncanny and proven ability to accurately predict future trends. The only real mistake that I am aware of is Mr. Pickens’ timing regarding natural gas prices some years ago. He was right about the price move, but he was just a little early.

Mr. Rainwater was profiled in the 12/14/05 issue of Fortune Magazine, “The Rainwater Prophecy.” Mr. Rainwater is deeply concerned about Peak Oil. In the article, Mr. Rainwater said, “This is the first scenario I’ve seen where I question the survivability of mankind.” Mr. Rainwater first became concerned about Peak Oil after reading “The Long Emergency” by James Howard Kunstler.

According to Bill McKenzie, with the Dallas Morning News, the primary reason that President Bush used the “Addicted to OIl” phrase in his state of the Union Speech was the Fortune article about Richard Rainwater, and again Mr. Rainwater became concerned about Peak Oil after reading Mr. Kunstler’s book.

On November 1, 2005 the Greater Dallas Planning Council and the Southern Methodist University Environmental Sciences Department cosponsored a symposium featuring Mr. Kunstler and Matthew R. Simmons entitled “The Unfolding Energy Crisis and its Impact on Development Patterns.” Mr. Pickens, via BP Capital, was one of the lead underwriters of the event.

Mr. Pickens, several of his associates, and several other notable Dallas businessmen such as Herbert Hunt were at the Simmons/Kunstler symposium, but no one from your respective editorial and news departments were able to make the event--despite multiple notices of the event.

In any case, Mr. Pickens has publicly stated that he believes that the world is at peak oil production. Mr. Pickens has publicly suggested increasing the gasoline tax, in an attempt to reduce oil consumption, with offsetting tax cuts elsewhere.

I certainly don’t speak for either Richard Rainwater or Boone Pickens, but my impression of these two gentlemen--along with Matt Simmons and Jim Kunstler--is that they are American patriots, in the truest sense of the word, who are trying to warn their fellow Americans about the dangers posed by Peak Oil.

In the Fortune interview, Mr. Rainwater was quoted as follows, “I believe in Hubbert’s Peak. I came out of Texas. I watched oil fields reach peak and go over, and I’ve watched how people would do all they could, put whatever amount of money into the field, and they couldn’t do anything about it.”

Much of the Peak Oil debate is based on pioneering work done by a famous Texas born geoscientist, M. King Hubbert. My coauthor, “Khebab,” and I wrote an article that was published on the Energy Bulletin website, “M. King Hubbert's Lower 48 Prediction Revisited: What can 1970 and Earlier Lower 48 Oil Production Data Tell Us About Post-1970 Lower 48 Oil Production?” Following is an excerpt from that article.

Fifty years ago this week, on March 8, 1956, at a meeting of the American Petroleum Institute in San Antonio, Texas, M. King Hubbert, in the preprinted version of his prepared remarks, had the following statement, "According to the best currently available information, the production of petroleum and natural gas on a world scale will probably pass its climax within the order of a half century (i.e., by 2006), while for both the United States and for Texas, the peaks of production may be expected to occur with the next 10 or 15 years (i.e., 1966 to 1971)." As more and more people are learning, Lower 48 oil production, as predicted by Dr. Hubbert, peaked in 1970, and it has fallen fairly steadily since 1970.

Kenneth Deffeyes, in Chapter Three of his recent book, "Beyond Oil: The View From Hubbert's Peak," described a simplified way of predicting the production peaks for various regions and for their subsequent declines. One simply plots annual production (P) divided by cumulative production to date (Q) on the vertical axis, or P/Q, versus Q on the horizontal axis. Stuart Staniford, on The Oil Drum Blog, has described this technique as "Hubbert Linearization" or HL.

With time, a HL data set starts to show a linear progression, and one can extrapolate the data down to where P is effectively zero, which gives one Qt, or ultimate recoverable reserves for the region. Based on the assumption that production tends to peak at about 50% of Qt, one can generate a predicted production profile for the region. The Lower 48 peaked at 48.5% of Qt.

Using the HL technique, Dr. Deffeyes, an associate of Dr. Hubbert, predicted that the world crossed the mathematical 50% of Qt mark on December 16, 2005. In other words, Dr. Deffeyes believes that the world is now where the Lower 48 was at in the early Seventies.

We used the HL method to predict post-1970 Lower 48 cumulative oil production, using only 1970 and earlier production data. Our work indicated that the HL method was 98.7% accurate in predicting post-1970 Lower 48 cumulative oil production.

We need to differentiate between conventional and nonconventional oil. Perhaps the best way to differentiate the two types of oil is to classify it the following way. Conventional--the oil will move to a wellbore on its own. Nonconventional--the oil and oil-like solids have to be surface mined or heated in order to move to a wellbore (or synthesized from lighter hydrocarbons).

Dr. Deffeyes estimates that we that we have two trillion barrels of recoverable conventional oil reserves worldwide and that we have used half of this amount.

Fossil fuels can be viewed as a continuum, from natural gas, to natural gas liquids, to condensate, to light sweet crude oil to heavy sour crude oil to bitumen to coal. (Kerogen, a precursor to bitumen, can also be processed to yield oil.) This list is a progression from gas, to liquid to solid. It is also a progression from cleanest, natural gas, to dirtiest, coal.

The world wants Liquid Transportation Fuels (LTF’s)--gasoline, diesel and jet fuel. LTF’s can be obtained for the least expenditures of energy and capital from light sweet crude. It only makes sense that light sweet crude will peak before heavy sour, and based on the current historically high spreads between light sweet crude and heavy sour crude, that appears to be the case.

The world is increasingly turning toward the endpoints--natural gas/natural gas liquids on the light end and bitumen/coal on the heavy end--in an attempt to maintain and increase our supply of LTF’s. There are several problems. These are hugely capital intensive programs that tend to produce liquids at very low rates compared to conventional oil sources, and on the heavy end there are some fairly severe environmental consequences. Another point that is often overlooked is that every fossil fuel resource, except for kerogen, is currently being commercially exploited. In other words, we are simply talking about increasing our rate of extraction of our finite fossil fuel resource base in a desperate attempt to maintain the current American way of life of driving $50,000 SUV’s on 50 mile roundtrips to and from $500,000 mortgages.

Currently, the most significant source of nonconventional oil is the tar sands play in Alberta, Canada, where bitumen is being extracted via surface mining or via the injection of steam into deeper beds.

From fossil fuel and nuclear sources, the world currently uses the energy equivalent of a billion barrels of oil (Gb) every five days. The mighty East Texas Oil Field, the foundation of so many Dallas fortunes, the largest oil field in the Lower 48, and the field that was largely responsible for providing the oil to power the Allies victory over the Axis powers in World War II, made about 5.5 Gb. The field is currently producing 1.2 million barrels of water per day, with a 1% oil cut. It took about 75 years to pretty much fully deplete the East Texas Field. In terms of oil equivalent, the Barnett Shale Gas Play in North Texas should ultimately produce, over several decades, on the order of 4-5 Gbe.

The world uses, from nuclear and fossil fuel sources, the energy equivalent of the recoverable reserves in the East Texas oil Field or the Barnett Shale Play in less than 30 days.

In the 4/2/06 Star Telegram, Automotive Journalist Ed Wallace, in the classified advertising section, wrote a rebuttal to the Peak Oil theories. Mr. Wallace’s two basic points: (1) improved technology will increase recoverable conventional reserves by 50% to 3,000 Gb and (2) nonconventional oil sources will add another 3,000 Gb. Therefore, based on Mr. Wallace’s estimates, we have used 1,000 Gb out of a 6,000 Gb resource base.

In the Viewpoints (Op-Ed) section of the Dallas Morning News, similar “cornucopian” energy abundance articles were published last year making basically the same points that Mr. Wallace made.

In regard to the technology issue, this assertion is directly contradicted by our experience in Texas (peaked at 54% of Qt), the overall Lower 48 (peaked at 49% of Qt) and the North Sea (peaked at 52% of Qt). Nothing the industry has tried in these regions has reversed the production declines once about half of the oil reserves were consumed. The reason is best illustrated by the East Texas field, now producing water with a 1% oil cut. What can better technology do to help a field that has watered out?

In regard to the nonconventional sources of oil, Mr. Wallace is primarily focused on the Canadian tar sands and shale oil (kerogen). The tar sands play is a proven commercial success, that is however hugely energy intensive and that is also yielding vast amounts of contaminated waste water. Mr. Wallace cites the most widely used estimate of 175 Gb in recoverable reserves (note that this should be discounted by about 35% to 50% to get net energy equivalent). He also cited a vague estimate by a Shell executive of 2,000 Gb, that can’t be currently recovered. There is one interesting research program testing some new shale oil technologies, but there is nothing commercial yet.

In any case, let’s look at past and current estimates of Canadian tar sands production. In 2003, the US Energy Information Agency (EIA) estimated that total Canadian oil production--driven by increasing tar sands production--would increase by 700,000 BOPD from 2003 to 2005. The reality? Total Canadian oil production fell from 2003 to 2005. The tar sands production fell short of estimates, and the increasing tar sands production the Canadians had could not make up for the decline in conventional Canadian oil production.

The Canadians themselves are estimating that tar sands production will only increase to about three million BOPD (mbpd) in 2016 from one mbpd today. Note that we will probably start losing a net two mbpd to four mbpd in conventional oil production per year, starting this year. Again, note that you have to discount the tar sands production by 35% to 50% to get net energy.

In effect, Mr. Wallace, and the other energy cornucopians see no problem with the $50,000 Hummer, $500,000 mortgage way of life.

Messrs. Rainwater and Pickens disagree. I can’t speak for them, but I assume that they believe that while nonconventional oil will help, it will only serve to slow the rate of decline of total oil production.

Some types of ethanol production (not from corn sources) appear have some possibilities, but there are a number of problems. Among the problems is a basic conflict between land devoted to food production and land devoted to fuel production. By the way, the US is probably now a net food importer. Currently, the US uses up to 10 calories of fossil fuels to produce one calorie of food. Ponder the impact on our food supply of a declining oil supply.

I realize that US media companies are facing severe economic pressures, and I realize that you are heavily dependent on advertising revenues from the housing/auto industries and from related companies. However, in my opinion we have hit the iceberg. The US media can lash themselves to the sinking ship, by failing to face reality, or you can face the reality of finite energy resources and start heading for the lifeboats.

I am supporting a proposal to abolish the Payroll (Social Security + Medicare) Tax and to replace it with an energy tax, principally a tax on liquid transportation fuels. This would unleash powerful economic forces against profligate energy use. Since it is in effect a consumption tax, it would tax those who currently don’t pay the Payroll Tax, by using cash. Instead of taxing payrolls to fund the Social Security and Medicare systems, we would instead tax energy consumption.

Alan Drake, a consulting engineer, has written a compelling article advocating a crash program of electrifying our transportation system, with special emphasis on Urban Rail.

I am working with a small group regarding the possibility of a Fall symposium on the Energy Tax and Urban Rail proposals, and we would be delighted to have support from The Fort Worth Star Telegram and/or The Dallas Morning News.

Note that these two proposals would address: the Social Security/Medicare crisis; the Peak Oil crisis; the loss of farmland due to suburban sprawl and Global Warming issues. We would replace “dumb growth” with “smart growth,” New Urbanism projects along mass transit lines.

In addition, I would at least ask you to give your readers a balanced report on the Peak Oil issue. Two leading citizens of your respective cities--Richard Rainwater and T. Boone Pickens--are deeply concerned about Peak Oil. The stated mission of the Fort Worth Star Telegram is: “Earning the People’s Trust Daily.” I assume that the Dallas Morning New concurs with this mission statement.

In my opinion, the US media have two choices regarding the Peak Oil issue. To paraphrase Winston Churchill, you can now have either your honor or the status quo. If you do nothing regarding Peak Oil, you will soon have neither the status quo nor your honor.


Jeffrey J. Brown
Demand May Outpace Saudi Oil CapacityBy JIM KRANE, Associated Press Writer
Mon Apr 3, 2:14 PM ET

DAMMAM, Saudi Arabia - The world's only oil superpower boosted output last month, launching a pair of projects that are part of a massive $55 billion endeavor to keep pace with the world's ever-intensifying thirst for oil.

But demand for the world's premiere source of energy is rising so fast — by around 2 million barrels per day each year — that even Saudi Arabia's vast resources will be unable to cope without drastic help, oil executives and analysts say.

Remarkably, even Saudis, who control over a quarter of the world's known oil, are calling for relief from relentless consumption.

"The current out-of-control demand is not good for us," Ghazi Al-Rawi, head of private equity at Gulf One Investment Bank, said in a recent interview. "When you have this kind of demand, you're forced to supply beyond the optimal rate. That's not a positive thing."

Most urgently needed is energy conservation, especially in the United States, which now burns up a quarter of the oil sold to the world, said Saddad al-Husseini, the former head of production at state-owned Saudi Aramco.

Also critical is the development of fuels from oil-rich sands or natural gas that can act as substitutes for oil. Other producing countries — especially OPEC's No. 2 and 3 leaders Iran and Iraq — could ease the crunch by boosting exports to handle a greater share of the surging demand in China and India, Saudi experts said.

"We need some help," said Nawaf Obaid, a Saudi petroleum adviser with close ties to the government.

If such help doesn't materialize and Saudi Arabia maxes its output — cranking out perhaps 35 percent more oil than it does today — the kingdom's proven reserves might only sustain those gushing flows for a couple of decades before starting to dwindle, al-Husseini said.

"Can (global consumers) afford to keep increasing demand by almost 2 million barrels a day each year? Is it Saudi Arabia's role to meet that demand?" asked al-Husseini, who retired in 2004 after working 32 years in the kingdom's oil sector. "You're leading yourself to having to find an alternative source of energy very quickly."

Few analysts believe oil worldwide is actually running out. But experts differ on whether the current soaring oil demand will outstrip the current supplies, and how quickly.

Many blame today's tight market on 20 years of low oil prices that stifled investment in new wells, refining and exports.

Keeping prices high is the best way to meet demand over the next decade or two, said Leonardo Maugeri, an executive with the Italian energy company ENI. High prices give investors incentive to spend the billions needed to boost oil production and develop alternate fuels, Maugeri wrote in the current issue of Foreign Affairs.

But Maugeri also wrote that it takes six to eight years for oil from a new well to reach consumers. Developing oil sands or natural gas-based diesel fuel is even slower and more expensive.

Saudis worry that consumer demand could overwhelm the slow progress in bringing new energies to market. "If this continues, you'll have demand outstripping supply over the next five years by a wide margin," said Obaid.

Others, like Sharif Ghalib of Energy Intelligence Research in New York, say the world's cushion of excess oil production capacity — a safety margin that keeps a lid on prices — is so low that demand could outstrip supplies now. All it would take is a single oil producer going off-line for any reason.

"The crunch is already here. It's not five years down the road," Ghalib said. "There is no thought being given in the U.S. to raising gasoline taxes or increasing mileage on U.S. cars. In China, automobile use is skyrocketing."

For now, Saudi Arabia is bent on meeting this demand by drilling wells and laying pipe.

In March, state-owned Saudi Aramco and Japan's Sumitomo Chemical Co. broke ground on a $10 billion oil refinery and petrochemical plant that will be one of the world's largest when finished in 2008.

The refinery, one of two planned in the kingdom, is aimed at opening bottlenecks on delivery of refined products like gasoline and diesel. The plant will boost Riyadh's output because it can refine heavy sulfurous crude that the kingdom is now unable to sell.

Saudi Arabia and its partners plan to invest a further $28 billion in three more huge refineries, in China, India and Texas, Obaid said.

Also last month, Saudi Arabia began opening valves on a 300,000 barrel-per-day expansion in output from the world's largest oilfield. By summer, the full flow of the black oil is supposed to be under way.

These are just the latest installments of what experts describe as the world's largest oil expansion effort, which will boost Saudi Arabia's output capacity by 2009 by almost 14 percent — from 11 to 12.5 million barrels per day.

If demand warrants, the Petroleum Ministry could decide to invest another $8.5 billion in a further boost of 800,000 barrels a day by 2013, bringing sustainable capacity to 13.05 million barrels a day, Obaid said.

Saudi Oil Minister Ali al-Naimi has said the kingdom could reach and sustain 15 million barrels per day in output if needed.

But even leaping to those frantic levels won't satisfy spiraling world demand for long, analysts say.

"The Saudis can't do it alone," said Ehsan Ul-Haq, chief analyst of Vienna-based energy broker PVM Oil Associates.

And pumping at 15 million barrels a day, the lifespan of Saudi's 260 billion barrels of proven oil reserves would be shortened by 30 percent, with output dwindling about two decades from now — "within our lifetimes," al-Husseini said.

The kingdom has already used up 100 billion barrels. Production typically declines when a country has produced half of its reserves. That's 180 billion barrels in Riyadh's case, al-Husseini said.

"If instead of reliable oil production lasting 20 years, it were to last for 40 years, then we would all be ahead," he said. "That's why there is a need to supplement conventional oil with other sources of energy."

Energy demand heats up far more readily than it cools off. Only steep and painful price increases have much effect on oil consumption, said Dalton Garis, an oil economist at the Petroleum Institute in Abu Dhabi.

Prices could also drop, however, Garis said, if Saudi Arabia's expansion is met by slowing demand.

That is starting to happen. In two years, the increase in world demand has slipped from a high of 2.7 million barrels a day in 2004 to an expected 1.6 million barrels per day in 2006, Ul-Haq said.

Overall, Ul-Haq said he expected global demand to grow yearly by 2 million barrels per day in the next few years, with most of the growth coming from Asia.

"We're really not going to change our consumption behavior until oil hits $80 a barrel," Garis said.