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By Titos Christodoulou
The End of Cheap Oil is nigh… is this the end of civilisation?
“Energy will be one of the defining issues of this century, and one thing is clear: the era of easy oil is over… Many of the world’s oil and gas fields are maturing. And new energy discoveries are mainly occuring in places where resources are difficult to extract - physically, technically and politically”. The stark message is accentuated by the towering title: “The world consumes two barrels of oil for every barrel discovered: so this is something you should be worried about?”
We are hearing this from the horse’s mouth. This candid, if somewhat reserved message, comes from Chevron, America’s second largest oil company and one of the notorious Seven Sisters. Revealingly, it is in response to these problems in oil supply, actual and anticipated, that the Seven Sisters have been seen entering a phace of determined mergers, downsizing or shedding staff. Chevron has been placing this downbeat message since July in double page adverts in the Financial Times and the Economist.
‘Written” on the Wall?
And they are not the only alarm bell ringers these days. As this essay is progressing, the gloomy advert can still be seen in the latest issue of the Economist, giving another twist to the magazine’s leader, on the adjacent page, that argues the unsustainability of the sources of world growth. In fact, two weeks earlier, the same magazine’s cover featured the “oiloholics” China and US, advising that “unless the world’s biggest guzzlers curb their thirst, oil prices could get even higher”, and the “headache could be severe”. Timely came also, this week, the exquisitely detailed and seriously alarming main feature in the October issue of the Ecologist, warning of “years of unprecedented upheaval and change upon us” as we have reached “The End of Cheap Oil”. The magazine dares put the finger on the wound: as the end of oil will mark a sharp decrease in the “population carrying capacity” of the planet, in fact, fron the current 6.9 billion to only two billions, the stark question arises: “How many of us will survive?”. Mombiot’s article in Tuesday’s Guardian, only adds to the “synchronicity flavour” of this concurrence of alarmist or ther counter denialist publications. ASPO, the Association for the Study of Peak Oil, has been busy as ever, publishing articles, studies and statistical reports regarding the impending Peak Oil and the Energy Bulletin files on the net numerous reports converting on the same message: the End of Cheap Oil is nigh.
Whilst it is argued, and fervently so, whether the peak is nigh or… not so nigh, and albeit there will always be the denialists who argue (in 50,000 websites, many of them supported by US goverment agencies) that thing are rosy as ever, the sun never sets and we can guzzle up our cars driving blindfolded against the wall, the consensus arising from this mayhem is clear: within our lifetimes (those of us who are not older than their forties or fifties) shall be seeing the start of the decline of world oil production and definitely the “End of Cheap Oil”. Add to these the excellent studies by Andre McKillop and Sheila Newman, ‘The Last Energy Crisis’,, Pluto Press 2005, CJ. Campbell’s ‘Oil Crisis’, Multiscience Publishing, 2005, Kenneth Deffrey’s ‘Hubert’s Peak, Princeton University Press, 2001, R.l Heinberg’s ‘The Party is Over’, Clairview Books, 2003, Crossing the Rubicon: the Decline of the American Empire and the End of Oil’, New Society, 2005, also his ‘Powerdown: Options and Actions for a post-carbon world’, Clairview Books, 2004 and Matt Simmon’s ‘Twilight in the Desert: The Coming Saudi Shock and the World Economy’, Wiley, 2005, among other recently published books and you have an impressive battery of detailed and scientififally argued surveys into what may well be the end of civilisation as we have known it.
More immediately, those interested to hear the trumpets of prophecy may in fact enroll to attend the one - day conference ‘The End of Oil” (and its consequences for food, climate and the economy) organised on the 11th October 2005 with speakers including Alam Meacher MP, Tim Lang, Chris Skrebowski and Ian Gibson MP (you may book on www.eafl.uk/oil, but be ready to scoff £25/50 for the right to be alarmed).
Why didn’t we see it coming? Or did we, and chose the sirens of growth and eternal consumption to the trumpets of impeding doom? What sort of scientific predictive tools do we have at our disposal to avail us of an accurate picture of the prospects of world oil supply? What have been their messages and what is the record of their successful past predictions, if any? What are the prospects for future oilfield discoveries? Is there a real hope for mankind to proceed, even in this last hour, to the development of sufficient renewable energy sources? Is there a real hope for humanity to free itself from its total dependency from fossil fuels, without which, for the moment, there can be no mass production of food and clothing, no speed travelling of the sort that has made the world one, no endlessly accelerating growth and prosperity, no globalisation, in fact, no real future?
Or is it that the drums of war in the Gulf, where the American hegemon has already occupied one oil ‘swing producer’ and threatens another, namely Iran, even casting a long shadow over Saudi Arabia, together with the US increased military presence in the oil rich Western Africa, and the thinly veiled threats against the odd man in OPEC, the Venezuellan president tell us an important story of how high oil security has climbed on the world political agenda? In fact, the US hegemon’s priorities have been there for a bit longer: as an analyst succinctly put it, “three topics have topped the US political agenda during the last 100 years: oil security, oil security and oil security”. For this century, change ‘security’ into ‘survival’. The fact that wars are resource and scarcity driven, mostly oil in the last 100 years, this is a truism that becomes even more apparent if one superimposes a map of the oil reserves and the pipeline routes over a map or war conflicts. Surprised? A total match! 21st century wars will be resource wars and the struggle to maintain a firm grip on the world’s oil reserves and supply routes will have a primary impact on the existing fault lines of international conflict; oil has returned geopolitics to the driving seat of international diplomacy.
Shadowy Reserves
Only on Tuesday, the Saudis informed (once again) the world that they could raise their production levels from the current 9.5 mbd (million barrels per day) to 12 mbd to sufficiently cover the eventualities of oil supply disruptions from elsewhere; in doing so, they would be performing their role as ‘swing producers’, i.e. one of the five key oil producing countries that produce much more oil than they consume, being thus in the position to determine the level of world oil supplies. But there are serious doubts whether the Saudi reserves, thought to have reached their peak point already, can support substantial increases in the Saudi oil production. A key role in assessing the future potential of Saudi Arabia, is the condition of its main oil field, the biggest in the world, the huge and venerable Ghawar. This giant oil field, some 300 klms long and 30 wide, was discovered in 1948 and has been producing for over 50 years. However, at the moment more water is pumped in the oil field than it is drilled, having reached the 36.5% of the oil reserve; it is generally assumed that 45% is the most water can reach before the oil field is considered depleted and is abandoned as either uneconomical or impossible to extract more oil from. While its is agreed that Ghawar can no more contribute to a significant expansion of the Saudi oil production, it is also thought as possible that its production rate may soon start to decline (note the reserved modalities reflecting Saudis’ secretive stance regarding the actual state of their reserves).
The debate regarding the overall capacity of the Saudis to increase their production significantly was more pertinently raised by the investment banker Matthew Simmons in 2004. Studying the whole array of technical papers on Saudi oil production and having interviewed a number of engineers working on site, Matthew Simmons raised the alarm bells that Saudi Arabia’s potential to increase production is soon reaching its limits. And although the Saudi executives reacted vehemently to Simmon’s conclusions, they could only confirm, via statements of the Saudi oil company Aramco, that the country’s 5 big oil fields (four onshore and one offshore) show decline rates. Indicatively, Abqaiq is depleted by 73% and Ghawar by 48% while the proven reserves, which were assumed to amount to 262Gb(giga barrels = billion of barrels) are only 130 Gb; another 130 Gb were added because they were thought as probable to be developped eventually.
After the collapse of the Soviet Union, all attention was turned to the Caspian basin, where expectations ran high that the oil reserves could rival those of the Gulf. Caspia featured high on the geopolitical agenda of the hegemon, and US forces are now stationed in several countries bordering the inland sea. The US federal energy authority EIA expected, in fact, the oil and gas reserves in Kazakhstan to amount to 300 Gb of oil or equivalent equaling the Saudi reserves.
A chimaera it proved, as only 45 Gb are expected to be recoverable, half of which in already developed fields. With this turn of things, also went the hope that Kazakshtan would prove to be a counterbalance to Saudi Arabia. The three fields with potential, Tenghiz (already being developed by Chevron), Kamchagarak and Kashagan contain oil with high sulhphur which makes extraction expensive and dangerous for the environment. Azerbaitzan, the oldest producing oil field in the world (even before Col. Drake drilled the mother of the American wells in Pennsylvania) is expected to peak in 2008 or 2009, producing 1 mbd and drop significantly after that. As a result of the Caspian disappointment, two oil companies, Statoil and BP have abandoned the area. The huge disappointment that is Caspia, has resulted in a drastic 20% downwards review of world reserves, from 1.2 trillion barrels to 1 trillion. Russia, in turn, has last year announced via the director of its energy agency, Sergej Oganesyan, that the recent high growth rates cannot be maintained and that production will stagnate in 2005 and even decline (Associated Press, June 4th, 2004).
Infinite growth in a finite world is an impossibility
97% of world's money is created by fiat, as debt issued by the world's banks. Debt is the engine fuelling growth in the world’s economy. Unfortunately, even though banks may create as much money as they wish, as debt, they cannot create the interest for this debt. Thus, the world is inexorably spurned to a cycle of endless growth, to create the interest to serve the endlessly growing debt. Growth, thus, has to be infinite. Finance overtakes reality. But all this takes place in a finite world with the result that one should expect, indeed we have enough data to be alarmed by an eventual depletion of the planet's resources sustaining our insatiable drive to further growth.
"Infinite growth of material consumption in a finite world is an impossibility" as the German born British economist E. F. Schumacher put it. And more so, as the imperative of modernity has drawn into the globalised pattern of endless growth hitherto agrarian societies like China (contributing half of new global demand for oil since 2001) and India, that will not lurk for long behind. China is already the second largest consumer of oil in the world after the US. “Oxen have been replaced by Audis”, the world is faced with the inexorable contradiction of having to contain the demands of infinite growth within the limit of its finite resources. And as the world may be discovering the pain of this perilous contradiction, they may remember the wisdom of the ancient Greeks, mainly Aristotle, who abhorred the “infinite” as undetermined and unknowable and thought growth as necessarily limited by the perfection of an end (the perfect form) in which growth ceases and calmly and satisfyingly acquiesces. Heed to him: “the end of movement is rest!”
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